Microsoft’s two should-be M&A considerations

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.