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The merger man: Steve Ballmer was notorious for his hits; and, misses

New York, August 24, 2013, NYT:
Steve Ballmer

With his impending departure as Microsoft's chief executive, Steve Ballmer has put an expiration date on one of the most prolific deal-making streaks in technology over the past two decades.

But that career as a serial acquirer is notable as much for its misses as its hits. And the acquisitions have helped turn Microsoft into a gargantuan technology conglomerate that some investors regard as unwieldy, raising the possibility that Ballmer's successor will sell businesses, not buy them.

During Ballmer's 13-year tenure, Microsoft has purchased 149 companies, according to data from Standard & Poor's Capital IQ. Most transactions were for well under $1 billion. But some were blockbusters, notably the $8.5 billion acquisition of Skype in 2011 and the nearly $6 billion takeover of aQuantive in 2007.

With the deals, Microsoft moved into new business areas, from videomessaging to digital advertising to social networking. The new operations supplemented the software pioneer's traditional strongholds, the Windows operating system and the Office suite of apps.

Should Ballmer's successor choose to pick up the merger baton, he or she will have plenty of resources on which to draw. The company had $76.2 billion in cash and short-term investments as of June 30, a formidable war chest by any standard. Some analysts contend that future Microsoft deals may go toward selling businesses, however. Richard Sherlund of Nomura Securities suggested in late May that the company could sell its Bing search engine or Xbox home entertainment division to focus on its core products.

Under Ballmer, Microsoft has also made a number of other investments meant to shore up strategic allies, including taking a nearly 18 per cent stake in Barnes & Noble's e-reader business and lending $2 billion to help support Dell Inc.'s sale to its founder.

And Microsoft joined Apple, BlackBerry and others in a collective $4.5 billion bid for patents held by the defunct Nortel Networks two years ago. The unusual move was meant to keep the cellular networking patents available to the entire industry and trumped a competing offer by Microsoft's archrival Google.

Some purchases appear to have borne fruit. Microsoft has busied itself integrating Skype into core products like Windows. The videomessaging service has grown under its new parent, with $2 billion in sales expected for the current fiscal, from about $800 million two years ago.

And Microsoft's $1.2-billion takeover of Yammer last year allowed the company to add social networking to its corporate software offerings, while bolstering the service's customer base to nearly 8 million users from around 5 million.

But many of those deals have proved expensive follies. Last summer, Microsoft took a $6.2 billion accounting charge tied to its takeover of aQuantive, essentially writing off the acquisition of the digital advertising firm as a costly mistake.


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