Microsoft (MSFT): An Internet Fishing Expedition

Microsoft (MSFT) has not been able to home grow its own online business so it has decided to buy the solution a piece at a time. Yahoo! (YHOO) was supposed to be the largest contributor to Microsoft.com. That did not work out.

So far, the largest and most sensible M&A transaction from Redmond was its buy-out of Aquantive, a large display advertising operation. Not much has happened since that transaction closed.

Now Microsoft has spend over $500 million to buy Greenfield Online which owns internet price comparison operation ciao.com. According to Reuters, the world’s largest software company said the "acquisition should benefit its Live Search platform."

The trouble with Microsoft trying to buy itself out of its current online trouble a section at a time is that, if its spends the $40 billion it had earmarked for Yahoo!, it could end up purchasing a dozen or more companies to make a quilt. While the new handiwork may be large, it is hard to see how the pieces will work together. Integration of new holdings is not the easiest part of business. Mashing together a large handful of operations could be close to impossible.

Microsoft might gamble that picking up a big prize like AOL would make sense, but so far it is avoiding that option. That leaves the firm with the opportunity to build its internet strategy piecemeal or simply let the competition like Google (GOOG) own the field and stick to its core software business.

Microsoft is not going to give up, so it will have to create its new online world brick by brick.

Douglas A. McIntyre