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Microsoft to pursue smaller acquisitions

Microsoft chief executive Steve Ballmer laughs as he talks at the Web 2.0 Summit in San Francisco, California, on Thursday. PHOTO: AP

Microsoft Corp chief executive Steve Ballmer said on Thursday the company aims to pursue an independent path, focusing on up to 20 smaller acquisitions of US$50 million to US$1 billion each annually rather than mega-deals.

Armed with a cash pile of US$23 billion, Microsoft has been rumored to be targeting acquisitions like Yahoo Inc or social networking phenomenon Facebook.

Speaking to the Web 2.0 Summit in San Francisco, Ballmer would not comment directly on any potential acquisitions, but he said Microsoft's current focus is the "independent path."

"If at some point it makes sense, maybe then it makes sense. But that's not where we are going. We are driving in an independent direction," said Ballmer in a question-and-answer session.

The CEO of the world's largest software maker said it was logical for people to speculate that main rivals would join forces to take on an industry leader. In this case, Ballmer was referring to dominant Web search leader Google Inc.

Microsoft historically has shunned costly acquisitions, opting to purchase lots of less expensive companies. But company watchers saw this year's US$6 billion acquisition of digital advertising company aQuantive Inc as a change in strategy.

Due in part to the aQuantive acquisition, Microsoft chief financial officer Chris Liddell has said the company will spend more this fiscal year in acquisitions than on research and development for the first time in the company's history.

Microsoft has said it bought 23 companies in the 2007 fiscal year ended in June. Of those, it reported 13 acquisitions valued at a total of US$1.34 billion, including an US$800 million purchase of voice recognition technology company Tellme Networks.

"We'll probably buy 20 companies a year consistently for the next five years," Ballmer said.

Ballmer took the stage a day after Facebook CEO Mark Zuckerberg, who like Gates is a Harvard dropout turned technology wunderkind, spoke to the audience.

Both men were reserved in response to questions about reports that Microsoft was in talks to buy up to 5 percent of Facebook in a deal that could value the social networking company at US$10 billion or more.

Zuckerberg and Ballmer both said: "We'll see."

Ballmer also said that the two companies have a "great" partnership in advertising.

Ballmer also restated the company's commitment to building a powerful Web advertising business and acknowledged that attracting users to its Windows Live search engine will be an important aspect.

Microsoft placed third in the US Web search market with a 10.3 percent share last month, versus 57 percent for Google and 23.7 percent for Yahoo, according to comScore Inc.

Ballmer also compared the company's search technology to a precocious toddler -- one who would eventually grow up to rival nemesis Google.

"You're just three years old, and we've got you in there playing basketball with a 12-year-old," Ballmer gushed and gesticulated, nearly popping out of his seat. "You're growing up quick and getting better every day, and you've got all the potential in world, and it may take you 'til you're seven, eight, nine or 10, but you're gonna dunk and you're gonna dunk on the other guy some day, Johnny."

Earlier this year at Stanford University, Ballmer characterized the search leader as a "one-trick pony" and described Google's growth plans as "insane."

On Thursday, he said he meant the one-trick comment "in a very specific way."

"They started in one area, they get really good in that area and then fill out around core," Ballmer said.

"Microsoft is unique in that we've already got two areas. We started out as a desktop computing company and now we've got a huge enterprise business. We're trying to do devices and entertainment, and advertising and the Web. We're trying to be a three or four-trick pony," he said.
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