Analyst: Microsoft Should Shed ERP, CRM Software Lines

Microsoft Corp. (MSFT) should cut its losses on selling customer relationship management and enterprise resource planning software, says the 451 Group's Brenon Daly in a new report. After spending $2 billion on deals, including the $1.1 billion acquisition of Great Plains Software Inc. in 2001 and its 2002 purchase of Navision AS for $1.3 billion, and millions of dollars more on internal development, Microsoft's Dynamics product line still lags rivals and should be sold, the analyst argues.

Not that Microsoft is likely to take him up on the suggestion. For one thing, there aren't many potential buyers. Most ERP vendors are too small to swallow the Dynamics line, and the state of the credit market would probably put software-focused private equity firms like Thoma Cressey Bravo or Hellman & Friedman out of the running. Additionally, Microsoft is known for being patient to a fault with struggling companies.

"Microsoft, which throws off more than $1 billion each month in cash, isn't going to be driven into action by the underperformance of a tiny division that accounts for less than 2 cents of every dollar it brings in as revenue," Daly says.

The upshot: Despite the strong business case for dumping Dynamics, don't hold your breath. Then again, Microsoft has been full of surprises lately. - Olaf de Senerpont Domis

See March 7 report from the 451 Group

See March 5 post from Tech Confidential

Comments

[Tom B:]

I can think of lots of other divisions that ought to be given the axe first: Windows Mobile. Xbox, Zune to pick a couple.

At least ERP/CRM is within MSFT's core expertise-- selling bloatware to syncophantic Enterprise CIO's.

2008 Mar 14 09:07 AM