Microsoft Should Acquire SAP, Not Yahoo

Reservoir Hill writes "Randall Stross has an insightful article in the NY Times that says that if Microsoft thinks this is the right time to try a major acquisition on a scale it has never tried before, it should pursue not Yahoo but SAP, another major player in business software, thus merging Microsoft's strength with that of another. This is more likely to produce a happy outcome than yoking two ailing businesses, Yahoo's and Microsoft's own online offerings, and hoping for a miracle. Stross points to Oracle as a company whose acquisition strategy has picked up key products and customers while avoiding venturing too far from its core business, or overpaying. Stross recommends that Microsoft acquire SAP and leave it alone as an autonomous division — which would avoid a culture-clash integration fiasco. Besides, large enterprise customers are arguably the best customers a software company can have. A few dozen well-paying Fortune 500 customers may actually be more valuable than tens of millions of Web e-mail 'customers' who pay nothing for the service and whose attention is not highly valued by online advertisers."

Comments

Re:Hey we have a bunch of cash

[LiENUS]

For years they did not and I was surprised the FTC didn't bust them on this. Aren't stock buybacks and dividend payouts set by corporate charter and not the FTC?

Re:Oh, the humanity.

[palegray.net]

I think you meant Redmond, which apparently runs their city's website on Windows 2000, but your point still stands :).

MS Business Applications suck

[adamkennedy]

My current employer is a dominant player in our field, in a smallish country, that sells about a billion dollars of $stuff a year to 10,000 or so customers.

Our $30m+ competition for a new ERP system came down to SAP vs Microsoft.

SAP gave us 50 reference companies of similar size in similar industries, 5 of them in the same country as us, 3 of whom let us visit on site and grill them about their setups.

Microsoft gave us one reference company smaller than us in our country AT ALL, and one company in the US in a similar industry, but 10 times smaller than us.

We got the distinct impression that we would be pretty much the largest deployment EVER of Microsoft Business Apps in an industry similar to ours, by an order or magnitude.

SAP won, of course.

Microsoft has a horrid bootstrapping problem. Until they build up experience and a userbase that people like us can go visit and actually SEE their stuff working, they're going to struggle to be competitive.

The other big plus for SAP was their upgrade attitude "We understand that most of our customers want to upgrade their core ERP around every 8-12 years, on a Saturday afternoon" :)

debt and the deal structure

[Gary W. Longsine]

Microsoft to borrow money for Yahoo deal
"Microsoft Chief Financial Officer Chris Liddell said the software company may take on some debt to finance the cash portion of its 50-50 stock and cash offer for Yahoo, instead of drawing down its entire $21 billion cash pile."

Microsoft will borrow money, but may not go into debt, as their assets will exceed the value of the borrowed sums.

Re:SAP / Oracle

[Anonymous Coward]

erm, no. Standalone I believe.

Their software runs on Sun, IBM and Finnish flavours of unix and works with DB2 on unix and mainframes. So although a lot of people will buy Oracle DB to underpin their SAP installation, it's by no means their entire market.

Posting anonymously as I'm currently evaluating a significant software purchase with SAP and their competitors.