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So, now that it has $40 billion or so freed up, and an Internet strategy to revise, what should Microsoft (NASDAQ:MSFT) buy instead of Yahoo (NASDAQ:YHOO)?

The obvious answers, which have been much discussed, include Time Warner’s (NYSE:TWX) AOL business, News Corp.’s (NASDAQ:NWS) MySpace division and privately held Facebook. But maybe the company can make it self over with a Web 2.0 bargain-hunting spree instead.

Nice post today from Sramana Mitra discussing how Microsoft might construct itself a new Internet strategy from a series of smaller acquisitions. She proposes a $6 billion shopping spree which would create strong new niches in jobs, travel, real estate, personals and photography.

Her advice: Spend $1.5 billion on travel sites, starting with travel search aggregation site Kayak.com. Spend another $1 billion on real-estate sites, including real-estate search sites Trulia and Zip Realty (NASDAQ:ZIPR). She allocates another $1.5 billon for jobs related sites, including LinkedIn, which she thinks is worth $700 million to $800 million, eLance and Simply Hired. She also proposes the company buy Shutterfly (NASDAQ:SFLY), a photo site with a relatively modest market cap of $325 million, the personals site eHarmony - she figures it will got for $1 billion or so - and the social networking site Hi5.

Her takeaway: “For a budget of less than $6 Billion, Microsoft can clean up some of the current jewels of the Internet, and build itself a great management team of net-savvy entrepreneurs. Especially if these entrepreneurs can be incentivized to keep building according to their dreams, and in their respective domains, Microsoft will end up boasting the most envied portfolio of Internet properties.”

It’s an interesting theory: Assemble a strategy from the stray parts kicking around the Web. It certainly would be cheaper than buying Yahoo. But I’m not sure it would be better.

Microsoft today fell 20 cents at $29.04.