This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

A Microsoft Acquisition Could Solve Ballmer's Innovation Stall

If Adobe is too ambitious of an acquisition at its present $22 billion-plus market cap, Tim Armstrong-led AOL (AOL) could be an alternative worth considering.

In the 1990s a merger of Microsoft and AOL would likely have given the U.S. attorney general cardiac arrest. However, the decline of AOL's dial-up Internet business and Microsoft's perennial underachievement in Web search mean both firms aren't the tech sector monopolists they once were.

AOL would bring Microsoft significantly less congruous or important assets as Adobe; however, the company's CEO Tim Armstrong has proven himself as among the savviest turnaround experts in American business. In fact, Microsoft presently has many issues such as a declining legacy business that Armstrong has been effective at resolving at AOL.

As AOL's dial-up Internet business continues to move towards extinction, Armstrong has sold non-core intellectual property assets and reinvested in businesses that could propel the company forward in coming years. While profits from popular media brands such as Huffington Post, Techcrunch and are uncertain and likely immaterial to Microsoft's earnings, they could be helpful to the company if it plans to be in the consumer mobile markets for the long haul.

Armstrong has proven he has the financial discipline that will be a part of Ballmer's legacy at Microsoft, and he also has shown a decisiveness and vision that is much needed at the top of the software giant.

Of course, Microsoft could decide that Ballmer's biggest failure was his obsession with chasing consumer markets.

Ballmer plowed billions into Zune to compete against the iPod, he was unable to capitalize on an early lead in the smartphone market and then didn't deliver on the Windows Phone or Windows 8. Xbox stands out as one of the rare areas where Microsoft has seen success in a consumer facing business.

The company could try to spin off its smartphone, tablet and console businesses and reinvest in faster growing enterprise markets such as cloud computing. (CRM - Get Report) and its CEO Marc Benioff could be a nice fit for Microsoft and help it regain its mystique as a force to be reckoned with. While has struggled in recent quarters, the company nevertheless has businesses that would revamp Microsoft's offering to enterprise customers.

Such a move would likely strike fear in competitors such as IBM (IBM) and Oracle (ORCL) -- now a partner of - and signal that the company won't allow for a terminal decline of its desktop software businesses.

There are many other companies and CEOs who could add much needed assets and vision to Microsoft. What is clear is that Microsoft will have to do far more than hire a replacement to Ballmer if it wants to continue to be considered among the tech sector's elite businesses.

-- Written by Antoine Gara in New York

2 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AOL $0.00 0.00%
ADBE $76.55 2.10%
AAPL $93.77 0.08%
CRM $59.57 0.56%
MSFT $50.33 1.30%


Chart of I:DJI
DOW 15,936.27 +276.09 1.76%
S&P 500 1,864.28 +35.20 1.92%
NASDAQ 4,340.0830 +73.2460 1.72%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs