Microsoft Should Buy Palm and Forget Yahoo

I read a great article that stated that Microsoft should buy smartphone maker Palm instead of Yahoo.  It’s an interesting read. The author makes a compelling case for why Palm is the better buy. Listed below are some excerpts from the article.

“Buying Yahoo would solve none of Microsoft’s software woes—and could likely make them worse if Ballmer spends resources fixing what’s wrong with Yahoo rather than fixing what’s wrong with Windows Mobile. So here’s another plan: Earlier this month, Palm unveiled its fantastic new phone, the Pre. The device looks to be the most advanced competitor to the iPhone yet—in many ways, its user interface, which is much more responsive than Apple’s and features the ability to run multiple apps side by side, bests the iPhone. What it lacks, though, is distribution. The Pre will be locked to Sprint’s network, and Palm has only a fraction of the marketing muscle of Apple, RIM, and Google.

Microsoft might pay tens of billions of dollars for Yahoo; it could pick up Palm instead for just $1 billion or $2 billion and then spend several hundred million more on transforming the Pre’s user interface into a mobile OS that can run on phones made by multiple vendors. Microsoft would also gain a loyal Palm audience—and a base of developers looking to create apps for the device. And then Microsoft would have money left over to buy other software companies—startups and established firms that power the next generation of devices, or that are pioneers in the selling online software to companies. In other words, it could buy lots of companies that share its core mission—building apps—instead of one that makes its money in a completely alien business.

Microsoft’s own boom-era delusion was that by buying Yahoo, it could succeed in both the Internet ad business and the software business. Now that the boom is over, Microsoft ought to take a page from its rival and pick a single business. In 2009, companies are expected to spend about $45 billion on Internet ads. The market for software is nearly 10 times that size—around $388 billion this year. If you were Microsoft, which would you choose?”

The complete article can be found at Forget Yahoo-Buy Palm.