Microsoft may make more large acquisitions than it has
done before and become a more distributed company rather than
moving key employees to its headquarters, said chief financial
officer John Connors.
Although Microsoft has decided to return a significant piece of
its $60.6bn (£34bn) cash hoard to shareholders and not pursue a
takeover of German ERP firm SAP, large acquisitions are likely to
increase, he said.
"I think there is a probability that we will do more large deals
than we have done historically. There are not many SAPs out there,
but there is the potential that we could do a few big ones, but not
likely that big," Connors said. A big deal would be an acquisition
valued over $1bn, Connors indicated.
Microsoft's discussions with SAP were disclosed in June at the
beginning of a trial over Oracle's hostile takeover of rival
PeopleSoft. The talks ended after Microsoft decided the deal and
the post-union integration would be too risky. SAP is currently
valued at about $50bn.
While not providing any details of where Microsoft is looking,
Connors said that Microsoft needs a policy change if it wants to
grow by acquiring other companies. It is no longer possible to
simply move key people, such as research and development teams, [to
its Redmond headquarters], he said.
"Increasingly some of the companies we have looked at have had
more distribution than what we ideally like," he said. "I think we
will have to have a more distributed model if we do more
acquisitions."
Microsoft has usually had the core of its development work done
at its headquarters. However, acquisitions have already forced some
changes. Navision, the group that sells software for tasks such as
accounting and customer relationship management, is a major
development centre for Microsoft Business Solutions. Microsoft
acquired Navision in 2002 in a deal then valued at $1.45bn.
Connors went on to say that that Microsoft does not have much
trouble meeting the compliance rules such as Sarbanes-Oxley Act of
2002, but there should be relief for smaller companies.
Sarbanes-Oxley is a set of corporate disclosure and financial
reporting rules for companies that are traded publicly in the
US.
"For large organisations that have the resources the amount of
time spent on this by senior-level people is more diffused than in
a smaller organisation. So it is disproportionate for a small
public company in terms of senior management time spent on this act
and its compliance," Connors said.
"We have got to figure out maybe a version 2.0 for small
companies and some explicit language Congress and states have to
pass to limit the liability of particularly directors and officers
of small companies and in particular startups," he said.
Joris Evers writes for IDG News Service