Microsoft Relishes aQuantive Win

Microsoft(MSFT Quote - Cramer on MSFT - Stock Picks) "won" a competitive bidding situation for aQuantive(AQNT Quote - Cramer on AQNT - Stock Picks), CFO Christopher Liddell said in a call with investors.

Although at $6 billion, or $66.50 a share, aQuantive marks Microsoft's biggest acquisition to date, the deal represents "not a huge proportion of our cash on hand of around $35 billion," he said Friday.

aQuantive shares had shot up $27.92, or 77.8%, to $63.79 in recent trading on volume of 38.1 million shares. Microsoft was down 32 cents, or 1%, to $30.67.

Liddell said the deal should pass antitrust hurdles because of a lack of market overlap between the two companies, unlike Google's(GOOG Quote - Cramer on GOOG - Stock Picks) purchase of DoubleClick, which "will reduce competition."

Microsoft wouldn't speculate on any of aQuantive's assets that could be sold off, such as an agency that makes up a substantial portion of its vertically integrated advertising business.

As digital ad revenue grows an anticipated 20% per year through 2010, "tens of billions of dollars of economic value ... can be unlocked by having complete end-to-end solutions for online advertising," said Kevin Johnson, president of Microsoft's platforms and services division.

"We believe in this concept of software plus services," Johnson said. Microsoft will consolidate its advertising distributed over "intelligent devices at the edge of the networks running software that's complemented with services.

"We're building out services ... many of which are monetized using online advertising," Johnson said. The consolidation will include space sold on MSN, Office Live, Xbox Live and Windows Live. And aQuantive's video-on-demand capability will complement Microsoft's IPTV efforts, he added.

aQuantive's CEO, Brian P. McAndrews, will report to Johnson.

While this deal breaks Microsoft's history of generally smaller acquisitions, don't count out the possibility of other such deals.

"It doesn't necessarily signal that we will do anything more," Liddell said. But "we have been in a mode where we can drive growth better through acquisition."

Microsoft's second-largest acquisition was made in 2002, he said. The company acquired Navision that year for $1.45 billion.