Microsoft Will Make Small Acquisitions

Among the four large software vendors, Microsoft has been the least active in making significant acquisitions of midsize or large vendors, and we don't expect that to change. While Microsoft has bought many small software vendors over the years, it has made only five acquisitions of software firms with revenues greater than $150 million — with only one in the past four years. Strategically, Microsoft has focused on being a platform vendor that an ecosystem of independent software vendors (ISVs) can use to create their own software products. Microsoft's size and its scrutiny by antitrust authorities in Europe and the US also limit its ability to make large acquisitions. However, we expect Microsoft to make some acquisitions to fill in gaps in its evolving Dynamics enterprise application product.