Microsoft’s CEO Steve Ballmer today said the software giant will likely buy 20 or so companies a year for the next five years. Most of them will be what Ballmer characterized as “footnotes” that is companies in the $50 to $200 million range. Ballmer said such acquisitions are more strategic to the company than large ones.
There aren’t many companies in the $6 billion to $15 billion range the company would want, Ballmer said in a question and answer session at the Web 2.0 conference in San Francisco.
Microsoft’s most recent financials have it sitting on a nice bundle of cash – $23 billion and many expect the company to grab up some needed technology acquisitions. For example rumors have floated about Microsoft targeting Yahoo and Facebook. Microsoft bought 23 companies in the 2007 fiscal year ended in June. Of those, it reported 13 acquisitions valued at a total of $1.34 billion, including an $800 million purchase of voice recognition technology company Tellme Networks, Reuters reported.
Microsoft historically has shunned costly acquisitions, opting to purchase lots of less expensive companies, said a Reuters report. But company watchers saw this year’s $6 billion acquisition of digital advertising company aQuantive Inc as a change in strategy.
One area Microsoft is not buying technology is the ERP arena. The company in April said its hands were full integrating its Dynamics ERP line and does not plan to acquire any of the smaller vendors competing with the software giant in the midmarket area. Acquisitions are “not in our plan right now,” said Klaus Holse Andersen, the newly appointed corporate vice president for Microsoft Business Solutions Worldwide Sales and Operations. “We think we have the technology we need.”
Ballmer earlier this year said Microsoft never discusses potential acquisitions, but said, “We have not, by default done a lot of big acquisitions … but we wouldn’t rule it out.”
Ballmer was at the Web 2.0 event to show off PopFly, Microsoft’s new set of online visual tools for building Web pages and mashups. The idea behind PopFly is that it should let anyone create Web-based mashups without having to write code.
Whether or not Microsoft makes a slew of acquisitions or not, technology buying will be an industry-wide sport according to a study released this week. The 451 Group said this week that 85% of what it calls “strategic acquirers” say they will increase or maintain current levels of M&A activity in the coming 12 months. Companies buying other firms spent nearly $156 billion to acquire technology companies so far this year, a nearly 80% increase from the $87 billion they spent in the same period in 2006, 451 said. In the past six weeks buys have accelerated: total spending by strategic buyers shot up to $32 billion, about two-and-half times the $12.6bn spent in the period between September 1 and October 15 last year.
