Banking

Microsoft eyes larger acquisitions

The software giant's CFO says a target as big as SAP is less likely, but some big buys could be in Microsoft's future.

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By Ina Fried CNET News.com

Microsoft's financial chief said this week that the software giant is more likely to make big acquisitions than it has been in the past.

"We have done in the last 24, 28 months a couple deals over $1 billion," John Connors said as part of a panel discussion at Silicon Valley's Churchill Club. "There is a probability that we'll do more large deals than we have done historically."

Earlier this year, Microsoft confirmed that it had held takeover talks with business software giant SAP.

"There's not many SAPs out there, but there is the potential we could do a few big ones," Connors, Microsoft's senior vice president and chief financial officer said. "But not likely (to be) that big."

Most of Microsoft's ambitions in recent years have focused on smaller acquisitions. Many of its largest deals have been in the company's Microsoft Business Solutions unit, which produces business applications for small and midsize firms. In recent years, Microsoft has acquired Danish firm Navision, Great Plains Software and others.

But more acquisitions also mean spreading out the company's work force, something the company has generally eschewed in favor of concentrating as many employees in the Seattle area as possible.

"The thing that is nice about having the R&D people in Redmond is the cross-fertilization across teams and the ability to reorganize small groups under new initiatives," Connors said.

But, he said, "I think we'll have to have a more distributed model if we do more acquisitions."

Leaner, less greener
During the discussion, Connors also addressed the issue of Microsoft's cash position and noted that the decision to return cash came at the behest of all of Microsoft's investors—from growth investors to those focused on value and income.

But Connors said the decision is also good for the company, encouraging it become a leaner operation.

"For our employees, the change will be good in that people started to think, 'Hey, we've got all this cash—why can't I have budget increase of XYZ?'"

He said he is also hopeful that the move might make the company less of a target for lawsuits.

"The less cash we have, the less likely we are to be a big honey pot for the single largest growth industry in the United States—the trial lawyers," Connors said. "So you can't ever make too much cash, but you can have too much cash."

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