Microsoft Would Out-Cool Apple If It Buys Madison Square Garden Now

NEW YORK (TheStreet) -- Apple (AAPL) and Steve Ballmer, the former CEO of Microsoft (MSFT), have been in the news for their recent acquisitions.

Ballmer is now in the process of purchasing the Los Angeles Clippers. Apple, in a move that burnishes its "cool" image, is buying Beats Electronics, the headphones company with Dr. Dre as its "cultural barometer."

What's next? When the time is right, Microsoft should next go after Madison Square Garden (MSG), owner of "the world's most famous arena." Along with the legendary events arena, the company would bring basketball's New York Knicks, hockey's New York Rangers, a media segment and other valuable assets.

Three reasons:

The purchase will pay for itself.

The Dallas Cowboys and the New York Mets are getting $20 million a year for the naming rights for their stadiums. Neither is in Manhattan and neither has the number of world-class events Madison Square Garden hosts.

Microsoft should not sell the naming rights -- it would garner billions in publicity that will have the acquisition more than pay for itself (present market cap of $4.42 billion). On a daily basis, Microsoft will get advertising in the most expensive media market in the world. There is no end to how Madison Square Garden can be used in product placement for Microsoft.

It allows for investing in three monopolies.

As great as economic moats are for investing, monopolies are even better. Madison Square Garden comes with three: professional sports teams, an events arena in the world's financial capital and prime real estate in midtown Manhattan. It is difficult to think of any other single asset like this in the world. It is even more difficult to see how all will not rise substantially in value over the long term.

For the first time, Microsoft takes the offensive against Apple in the "cool" campaign.

New York City, specifically Manhattan, is cool. Mad Men, Sex in the City and Seinfeld are among the hit shows based here. The panache of Manhattan will rub off on Microsoft in the same way Steve Jobs cultivated the laid-back West Coast cool for Apple with his black turtleneck and offbeat diets, among other things.

Here's another factor that is more of a concern: It will prevent Microsoft from doing something stupid with the money.

Microsoft had to write off the entire $6.3 billion it spent for aQuantitative, an Internet marketing firm. Most tech mergers and acquisitions do not work. According to research from KPMG, about 90% of mergers and acquisitions fail.

Microsoft should do with Madison Square Garden what Warren Buffett does with acquisitions: Buy an attractive company and let the existing management continue to perform well.

There is no reason to try to change Madison Square Garden -- the premier event venue in the world easily tops a "genius bar" from Apple in mass appeal. The value of its three monopolies will increase, with much of that mostly unrealized.

Forbes estimated the worth of the Clippers to be $575 million and Ballmer is paying $2 billion. It is difficult to foresee Manhattan real estate, professional sports teams and an irreplaceable event arena not being good investments over the long term, not to mention billions in free advertising for the products and services of Microsoft.

At the time of publication, the author held no positions in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

If you liked this article you might like

Warren Buffett Is Never Going to Be the Dumbest Person on Wall Street

Warren Buffett Is Never Going to Be the Dumbest Person on Wall Street

A Top Investment Bank Just Made a Move to Protect Against Another S&P 500 Crash

A Top Investment Bank Just Made a Move to Protect Against Another S&P 500 Crash

What to Watch From Samsung, Google and Others at the Mobile World Congress

What to Watch From Samsung, Google and Others at the Mobile World Congress

Warren Buffett Is Sticking to His Strengths By Selling IBM and Buying More Apple

Warren Buffett Is Sticking to His Strengths By Selling IBM and Buying More Apple

Buffett Letter to Shareholders May Detail How He Intends to Spend $109 Billion

Buffett Letter to Shareholders May Detail How He Intends to Spend $109 Billion