How to Fix Microsoft for $5 Billion

Microsoft (MSFT) recently made Bing.com available to the masses. I personally love it...it will be my number 2 search engine after Duperoo.com (my own search engine that is currently being redesigned).

I am about to propose that if Microsoft gave me $5 billion from its war chest, I could make its online venture be positioned better and maybe even profitable.

Like I said, I like Bing, I think it will even get them a small sliver of marketshare from Yahoo (YHOO), but not Google (GOOG), not yet.

Here's my fix.

($50 Million) Take your 5 smartest guys in search, lock them in a room and an account with $50 million. Tell them they couldn't come out till they had a competitor to Adsense. This would give everyday webpreneurs the ability to show Microsoft ads on their sites and earn a portion of the profit. If Microsoft could only get a portion of Google's users, that would be considered a win. And Microsoft would be serving up hundreds of thousands more ads per day!

($100 Million) Buy Marchex Inc. (MCHX). This site operates a hefty online presence and is trading at a 75% discount from a year ago. Snap it up - it's cheap and increases your ad serving abilities.

($10 Million) Merely a rounding error for Microsoft, but I believe buying Miva (MIVA) would increase its advertiser base and the number of ads shown. It would be nice to also use its online properties to increase traffic.

($3 Billion) Buy Interactive Corp. (IACI). This company is not doing well in search but it is doing great in running its other online properties like evite.com, green.com, gifts.com, chemistry.com and match.com to name a few. Microsoft would gain an instant 2% in market share for search but it would get an impressive portfolio of online businesses that ARE profitable!

($18 Million) Purchase Looksmart (LOOK). Again, it is a small blip on Microsoft's books, but again, it comes with a list of advertisers and partnerships that Microsoft could leverage. It should wait to purchase Looksmart till December, because that is when It loses a partnership with IAC.

($70 Million) TheStreet.com (TSCM) - yes, buy it. This would be great to help push software purchases of Microsoft Money. It would also take a swipe at Yahoo Finance which is one of the most preferred finance sites. Bank and finance ads pay a premium for placement. You also get a small portfolio of great domains/sites as well as a large advertising company called promotions.com.

($1.1 Billion) Buy ValueClick (VCLK). This company was nearly bought a few years ago but for a much higher price. Microsoft went with aQuantive instead for $6 Billion. Microsoft could use the 15,000 US sites and 5,000 global sites to sell ads on! It has a hefty global reach.

($250 Million) Buy Adbrite.com. This site already helps advertisers show ads on over 100K websites, including some really well known sites. Microsoft could be to ads what eBay (EBAY) is to unique junk. "The largest online ad marketplace"

So far I have spent about $4.6 Billion, that leaves me with $400 million to play with.

Microsoft is the largest online retailer. But that is not why I want to see a partnership - rather it is because of cloud computing.

Amazon (AMZN) is the leader of in cloud computing, and a Microsoft and Amazon partnership would be unstoppable. You could search on bing.com and see a link to related products on Amazon. You then could sign up for future cloud computing subscriptions through Amazon but for Microsoft products, i.e. Office.

I also want to see a seperate building for online services. I want Microsoft's search and online business to be run like a seperate entity but still under the Microsoft umbrella.

There you have it. My $5 Billion duct tape fix for Microsoft. It would make the company a powerhouse in online advertising and might be enough to make a dramatic shift in online market share. It currently has less then 10%

Disclosure: I currently own MSFT and TSCM.

Comments

[Economyst:]

MS has had a questionable M&A strategy - their market cap was around $284bn in October 2006 and is about $191bn today.

MS has lost a great deal of sharehaolder capital due to a multitude of mistakes primarily because they were trying to chase every game in town. Diversifying is a good strategy but not when it spreads your talent, resources and most importantly wastes management time.

Your strategy above would be more of the same. MS should continue with its M&A activity to fill out gaps in its business model not create whole new revenue streams.

To beat Google at search MS needs to develop a search engine that works radically different to Googles as if they continue to copy Google they will always be following and not leading.

Google makes money when you click on the ads on the right but not in its search results - it's why SEO companies make money by making your results appear in the search results than in the adverts. If you have a marketing bdget of $1k you could spend it all with Google or spend $500 with the SEO company and $500 with Google. MS should develop SEO platform - this will do more damage to Google than building a search engine.

MS has to change the game like Nintendo did with the Wii from pure performance to interactivity.

Jun 03 01:04 PM

[Zenfar:]

They could buy Rackspace instead of partnering with Amazon.

Jun 03 01:13 PM

[Alex Filonov:]

Ain't gonna work. Mr Softee will chew and spit any acquisition. Microsoft needs to exit Web and do what it does the best: use monopoly position in OS, while it lasts, to leverage other products, like SQL Server and Office.

Jun 04 10:23 AM

[texas4qld:]

How would it be possible to buy Looksmart for $18 million when they have $30 million in cash in the bank and no debt.
IAC's contract to Looksmart is only worth $1.1 million from a quarterly revenue stream of $13 million.

Jun 04 11:04 AM

[june:]

there's one and only one thing that Microsoft can do at this point to remain a relevant and dynamic company, and unleash shareholder value and employee creatity -- split itself into 3-5 companies or more. one for games/xbox, another for office productivity software, one for Windows and Server, and finally an online + search co.

Jun 05 01:01 AM

[Thomas Jowers:]

18 Million in addition to the $30 in cash Looksmart already has.

I don't believe that MSFT needs to be split up, I would rather see a shake up in management. They have way to managers and not enough people who actually work. I see the same thing at the company where I work. My local branch has 95 employees, and 19 of them are managers. Do you really need that many managers, too much stuff gets lost in translation and makes it harder to be fast and competitive is all you do it have meetings about meetings.

Rackspace would be a goog acquisition for MSFT.

I know that MSFT acquistion history is far from perfect, that is why I think that seperate entities need to operate like seperate businesses so that they can innovate seperately and then collaborate within the company to better the product.

Acquisitions CAN WORK, MSFT just needs to look at previous purchases that have worked for other companies and try to capture that lightning in a bottle for their own company.

I know it wouldnt be a quick fix, but I personally think it would be a step in the right direction.

Keep the comments coming, This is what makes the world better, when we can communicate without yelling and arguing!

Thanks for the comments.

Don't forget to follow me on Twitter. Twitter.com/thomasjowers

Jun 09 03:35 PM

[texas4qld:]

Than perhaps your story should say $48 million instead of $18 million.
Cheers.


On Jun 09 03:35 PM Thomas Jowers wrote:

> 18 Million in addition to the $30 in cash Looksmart already has.
>
>
> I don't believe that MSFT needs to be split up, I would rather see
> a shake up in management. They have way to managers and not enough
> people who actually work. I see the same thing at the company where
> I work. My local branch has 95 employees, and 19 of them are managers.
> Do you really need that many managers, too much stuff gets lost in
> translation and makes it harder to be fast and competitive is all
> you do it have meetings about meetings.
>
> Rackspace would be a goog acquisition for MSFT.
>
> I know that MSFT acquistion history is far from perfect, that is
> why I think that seperate entities need to operate like seperate
> businesses so that they can innovate seperately and then collaborate
> within the company to better the product.
>
> Acquisitions CAN WORK, MSFT just needs to look at previous purchases
> that have worked for other companies and try to capture that lightning
> in a bottle for their own company.
>
> I know it wouldnt be a quick fix, but I personally think it would
> be a step in the right direction.
>
> Keep the comments coming, This is what makes the world better, when
> we can communicate without yelling and arguing!
>
> Thanks for the comments.
>
> Don't forget to follow me on Twitter. Twitter.com/thomasjowers

Jun 16 10:10 AM

[Thomas Jowers:]

What's 30 million among friends, or if you have $25 BILLION

Jun 16 02:03 PM