Tech behemoths have been very busy this year, splashing cash and buying up new companies. With Apple's acquisition of Beats rumoured to go through before WWDC 2014, Facebook's snapping up of Oculus Rift and Whatsapp, and Google's rumoured interest in purchasing Twitch, the video games streaming service, you have to wonder: what is Microsoft doing?
Microsoft has missed out on mobile and is now having to play catch-up in other areas, which makes it a prime candidate for acquiring hot startups and expanding into new product categories. Having splashed out $7.2 billion on Nokia it is clear Microsoft is not afraid of spending money, so here are the top five companies it should be looking at.
The technology press has been buzzing with rumours that Square (the payments company started by Jack Dorsey, the ex-CEO of Twitter) would file for an IPO in 2014 but weak financials and the possibility of a bubble in the stock market have prevented it so far. While Microsoft currently has no interest in the buying or selling of goods, the Square's technology could be integrated into future devices.
Square is currently valued at around $5 billion on private markets and could give Microsoft an entrance into new markets that go beyond computer and enterprise software. Jack Dorsey would also be a key asset for Microsoft to have with his vision and ideas having already propelled two companies (Square and Twitter) to billion dollar valuations.
As consumer-focused second cousin to Box, Microsoft could make good use of Dropbox in getting back leverage in the consumer market —something they sorely need. While there are rumours that Dropbox is going to IPO within the coming few years, the company is valued at over $10 billion, a drop in the ocean compared to Microsoft's war chest of $80 billion.
While Microsoft already has a cloud storage service in the form of OneDrive (formerly SkyDrive), much could be learnt from Dropbox and the combination of Dropbox and OneDrive could result in some exciting technologies for storing data in the cloud. Dropbox recently unveiled Carousel, an online gallery for all your photos and videos, which was met with wide praise from critics and customers alike and is a feature that OneDrive lacks.
After the $7.2 billion acquisition of Nokia and potential growth in the wearables market, Microsoft should be looking to invest heavily in this opportunity. Having missed the boat on smartphones and then tablets, Microsoft should be eager to catch up. The purchase of Jawbone, already a reputable wearables company, could help this.
Jawbone is privately valued at over $3.3 billion and has design pedigree in wearables after years of making bluetooth headsets, a pedigree that could easily be expanded to cover a smart watch. Jawbone's design language is functional and clean which fits with the "Modern UI" aesthetic of Windows 8 and Windows Phone.
Already an established company and brand, Adobe has a long history of making high-end creative software used by photographers, video editors, Web designers and more. Microsoft's software prowess is in enterprise and office applications, the antithesis of what Adobe produces.
Adobe is already a publicly traded company and would be a moon-shot purchase for Microsoft, costing in excess of $40 billion—half of their total cash on hand and 18 months worth of profits. With a net income of just $47 million in Q1 2014, Adobe is no monetary giant but the software they create is renowned throughout the world and would open up new industries to Microsoft.
5. Valve Corporation
Microsoft has a big foot in the door when it comes to hardware sales related to gaming. In the second quarter of 2014 the company shifted 4 million Xbox One units to customers with more expected in the third quarter due to a reduced price. Where Microsoft doesn't have a big presence is PC gaming. The majority of PC gamers use Windows as their operating system but Microsoft has no way to leverage that.
Valve, the company behind Half-Life and Steam, do, however, and Microsoft should acquire the company for that reason. As a private company, Valve is not at liberty to disclose its financial situation but estimates by Forbes in 2012 pinned the companies' worth at around $4 billion. In 2013 Steam announced that 65 million people use its service (more than Xbox Live) making it a snatch for such a small valuation.