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What Microsoft should do.

Microsoft is on a roll – with Bing, Windows7 and several other upgrades on their way later this year.  Microsoft has the power to force an upgrade cycle in corporations, lifting valuations of various hardware and software companies that stand to benefit from this upgrade cycle in 2010.

But even after all this, the stodgy Microsoft remains.  The growth engine of the 90s has faded into a one-trick pony.  And yes, the 30B of cash that is burning a hole in Ballmer’s pocket notwithstanding.

So, what can they do?  A few things:

1)  Buy Industrial Light and Magic.  George Lucas will not live forever, and would want to cash out anyway.  This would give Microsoft a very strong foothold in Hollywood, and stop the Apple product placements in every movie.  But the most important driver here would be to add the gaming skills to their xbox games, and churn out some serious gaming products.

2)  Buy Sybase - and shut it down.  Force the customers to an upgrade cycle with SQLServer, and stop the pain with Sybase.  There are but a handful of customers that keep Sybase afloat anyway.  The upshot will be some customers defecting to Oracle – fine…but most of them will migrate to SQLServer, given how similar the products are anyway.

3)  Buy Echelon, Seagate and combine them with Windows Media Server and XBOX.  So, I would get Windows Home Server, that serves up everything – Firewall, NAS, media, gaming and home automation (lights, heat, sprinklers etc.).  And give me a mobile controller that can run this home server from anywhere.  All technologies are available today.

So, can someone else do this, and prevent Microsoft a foothold in the home?  Apple seems the only logical competition – Google is busy experimenting with the web.  Apple can do all this – but does not have the bandwidth to run such a amalgam.  HP and IBM are busy with Professional services.

Home is the final frontier.  If need be, Microsoft can partner with Verizon, and get complete control of the last mile.  It may be an investment worth doing.

LONG: IBM, STX
SHORT:  None.