Microsoft's Revenge

Microsoft continues to be kicked around the block within the Internet business for heading on fifteen years. Now it truly is possibly payback time.

While every person else hunkers down and fights to survive, Microsoft gets to sit back and choose who to buy. When it decides, it may dig into a $20 billion income pile which will nearly replenish alone this year with $15 billion of totally free cash flow. No one else, such as Google,Windows 7 Ultimate 64 Bit Key, will gain this significantly of the relative advantage from the global financial collapse.

(Google, additionally, is now hamstrung by alert regulators--thanks, in aspect, to Microsoft's lobbying--and is centered on cutting fees and narrowing its ambitions. These need to keep it distracted for that next couple of years.)

Who could Microsoft purchase? Some obvious names, and many smaller not-so-obvious ones.

But the first thing Microsoft needs to do if it's to succeed long-term from the Net business is build a central consumer brand that it could hang everything else off of. (Alternatively, it might focus on the back end, via search and other technologies,Windows 7 Home Premium Sale, but this likely won't be as profitable. The vast majority of Google's immense profit comes from searches on its own site,Cheap Windows 7 Professional, not third-party sites, and the same will hold true for Microsoft).

The big consumer Internet brands other than Google include:
Yahoo AOL Facebook MSN, et al (Microsoft needs to consolidate ALL its Internet brands into one. This one's probably the most prominent).
Microsoft could probably get Yahoo, AOL,Windows Enterprise Key, and Facebook today for $20 billion of income. It could then consolidate them under a single brand and build a strong alternative for advertisers vis a vis Google. (Vastly easier said than done,Windows 7 Professional Key, but possible.)

If Microsoft isn't willing to put all its weight behind a single brand, it will probably fail regardless of what it buys. This continues to be Microsoft's Achilles heel for that past 15 years--an unwillingness to commit to one Web brand and strategy--and we're not optimistic that it will be able to get out of its own way this time either.

We still think the smart play here would be for Microsoft to spin its Internet operations OUT of Microsoft and INTO Yahoo and then build everything close to that brand as a separate public company. We think Steve Ballmer is congenitally predisposed against this approach, however, even though it would likely be a great move for Microsoft shareholders (who would own most of the new Yahoo AND the original Microsoft).

But, in any event, as the Valley goes into the fetal position, Microsoft's relative position is growing stronger. And we imagine this is not lost on the folks in Redmond.