Microsoft and Spent Cash

Microsoft has a nasty problem: figuring out what to do with $31.6 billion in cash. We can picture a sleep-deprived calling card Gates and a red-eyed Steve Ballmer toiling away night by and by night, trying to land Microsoft out of this predicament. It must be tough. So we decided to help them out by making a few suggestions on how Microsoft should spend its cash hoard.

Were going to put up a variety of acquisitions. While the company hasnt historically had an grasping culture, that seems to be changing. Last November, Microsoft hired Richard Emerson--a former managing director at the investment bank Lazard Frères--to head its mergers and acquisitions division. A month later, the company announced the purchase of the package developer Great Plains software system for $1.1 billion.

The only possible hitch could be its ongoing efficacious battle with the U.S. Department of Justice and 18 state governments regarding antitrust violations. Sources interviewed for this article, however, say that a settlement is the most likely issuing for the legal dispute, and that such a resolution would apostrophize Microsoft amid $1 billion and $2 billion. But thats chump change. Heres what it should do with the rest of the dough.

First, we think Microsoft should buy the security software developer Symantec.



Microsoft software has often been plagued by security concerns, and acquiring Symantec would improve its harvest-festival line with powerful antivirus and firewall capabilities. Since Symantec has a better mix of ground and enterprise products than other companies in the sector, acquiring Symantec would buy more(prenominal) bang for Microsofts buck than, say, springing for Network Associates. The deal, however, wouldnt be cheap. We put the cost of such a purchase at $4.2 billion, based on a 20 percent premium to Symantecs market care for as of August 14.

Microsoft should also buy the ISP EarthLink.

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