In its continuing battle with Google, Microsoft has worked its way down its list of ideas to its current course of action: pursuing a hostile bid for Yahoo.
Michael Cusumano, a management professor at the Massachusetts Institute of Technology who has written several books about the software industry and about Microsoft, is not impressed with Microsoft’s rationale. He said the bid seemed to be a pursuit of “an old-style Internet asset, in decline, and at a premium.”
Determined to match Google in Web search and online advertising, Microsoft has managed to overlook a plain-vanilla strategy, the oldest one in the book: build on your own strengths. What it does best is to sell software to corporations, for all sorts of applications, visible and not so visible, at a handsome profit.
If Microsoft thinks this is the right time to try a major acquisition on a scale it has never tried before, it should not pursue Yahoo. Rather, it should acquire another major player in business software, merging Microsoft’s strength with that of another.
For an illustration of how Microsoft could select targets more judiciously, Cusumano, a professor at the Sloan School of Management at MIT, pointed to Oracle’s strategic acquisitions and its prudent use of capital to “roll-up firms with similar products and customers to its own.” With impressive regularity — 13 strategic acquisitions in 2005, another 13 in 2006 and 11 in 2007 — Oracle has picked up major products and customers while avoiding venturing too far away from its core business, or paying too much.
Last month, Oracle pulled in another major prize, BEA Systems, a leading software company, for about $8.5 billion. You have probably never heard of BEA: it is doubly obscure, producing the behind-the-scenes infrastructure that large companies use to build behind-the-scenes software systems for their entire business, or…