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Microsoft’s two should-be M&A considerations

Posted on Sunday, Apr 10th 2005

Microsoft has stagnated, much to the chagrin of its investors. The powerful vision of the eighties and nineties – of putting a PC on every desktop – no longer seems like a big, hairy, audacious goal. Instead, they are looking for greener pastures – mobile handhelds, digital homes, internet telephony – so forth and so on. In that effort, Microsoft had also articulated a desire to go after the small-medium enterprise (SME) markets, but at the end of 2004, Microsoft Business Solutions (formerly, Great Plains Software) scored a paltry $667 Million in sales – only 2% of total revenues. Great Plains was acquired in 2001 for $1.1 Billion. In 1995 antitrust concerns had scotched a $1.5 Billion acquisition of personal finance software maker Intuit, a supremely logical candidate for the SME market.

John Madok at Applied Materials suggested over lunch the other day: “How about Paychex?”

Indeed, how about Paychex? It’s at $1.2 Billion revenue, and a $12.3 Billion market cap, so pretty expensive, but just as synergistic as Intuit, and can probably offer great leverage. And it may actually be permissible, even, without an anti-trust issue. Something to consider.

The other good one would be Autodesk. A leader in multiple markets that serve small-medium businesses, from the small time manufacturing shop floors, to the architect’s office. Autodesk is at ~$1.2 Billion revenue, and $7.5 Billion market cap, and services the $20 Billion Mechanical Design (MCAD) and Product Lifecycle Management (PLM) Market, among others. The Manufacturing software market has lots of players, so no anti-trust issues, presumably. Channels are also well-aligned.

A billion here and a billion there … Microsoft can certainly afford to buy some market leading products, especially since their internal engine hasn’t succeeded in producing the necessary winners.

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[…] and profits can revive the stock as well, prompting option-loyalists to stay at the giant. Sramana Mitra has some suggestions for Bill & Co. Autodesk and pay […]

Om Malik on Broadband » Microsoft Exec Joins Skype Tuesday, April 19, 2005 at 10:54 AM PT

What Microsoft badly needs areas they can grow into. They are pretty firmly established in the desktop market. Yes, there is a Mac here and a Linux there, but they own 95% of the desktop market. That counts. They should be getting into the other 2 screens of our life. The TV screen and the mobile screen. Although they are trying with the Windows mobile edition and the Windows media edition to enter/control the other two screens, they havent had much success.

If I were Microsoft, I’d try and capture (or atleast devise a sensible strategy) to capture the bottom of the pyramid markets aka emerging markets, before they are fascinated/addicted to the cheap/open source solutions out there. I’d not worry too much about the SME’s for now. I’d develop a SaaS solution for them (it reduces their TCO).

Anand Jain Tuesday, April 19, 2005 at 3:15 PM PT

[…] rise » SME » Media | February 5th, 2006 I wrote, earlier, Microsoft’s two should-be M&A considerations. Eric Schonfeld writes Google Enterprise and makes the ca […]

Sramana Mitra on Strategy » Blog Archive » Google’s three should-be M&A considerations Sunday, February 5, 2006 at 12:10 AM PT

[…] April 10, 2005, almost immediately after I started this blog, I had written a piece called Microsoft’s Two Should-Be Acquisition Candidates, from the point of view of addressing the growth trends in the SME markets. The two candidates […]

Sramana Mitra on Strategy » Blog Archive » Microsoft’s Growth Strategy Revisited Thursday, March 8, 2007 at 2:59 PM PT