Throwing more weight behind its punch, Microsoft is ready to buy support for its technology. With stock a deflated currency, cash is king, and Microsoft has quite a war chest. Investment bankers have been parading a string of eligible acquisition targets before Microsoft – among them EarthLink, Interwoven, Macromedia, SilverStream and WebMethods. "You name it, they've been shown it," says one Microsoft insider. (None of these companies would confirm this.)
Recent acquisitions hint at Microsoft's interest in businesses that enhance its Internet strategy. It bought Bungie Software and Digital Anvil, both computer gamemakers, to support its push into the games market with its Xbox console. It bought WebAppoint, which has online scheduling software that will become a Hailstorm service.
In December, Microsoft surprised the industry with its acquisition of Great Plains Software for $1.1 billion in stock. The move lands Microsoft in business process software, a segment of the market it had long said it would avoid. Addressing a dinner crowd in mid-March, Ballmer described the business applications market for small and midsize businesses as "terribly underserved by our industry."
Among the fast-growing segments that Microsoft is checking out are customer service and online marketplace software. Onyx Software and PurchasePro are considered potential targets in these areas. Many Wall Street investors speculate that NetIQ's online operations-management software also would be a good fit. (None of these companies would comment.)
Some high-tech companies must be glancing wistfully at that great pile of cash. Internet superstars from Amazon to Yahoo have been bombarded by negative news and pessimism. Even stalwarts Cisco, Oracle and Sun have succumbed to the market's downward pressure. Although Microsoft has not escaped – its shares remain in the doldrums and its quarterly earnings are threatened by the economic downturn – no company has greater financial strength to weather the market. As the floodwaters rise, there's no question that Microsoft will survive and its competitors' ranks will be thinned.
Make no mistake, neither the move toward open standards nor the gentle wooing of partners makes Microsoft any less tough to beat. The company is as voracious and aggressive as ever. Microsoft execs are specifically targeting Sun's business accounts, for example, internally calling the project "Sun Down."
