6 companies Microsoft should buy

Microsoft isn't short of cash, and it recently - and unsuccessfully - offered to buy Yahoo for $44.6 billion.

The idea was to catch up with Google, but the big G isn't the only firm doing well in areas where Microsoft isn't. So perhaps Microsoft should widen its net.

From video and music to shopping and social networks, we think these six firms should be on Microsoft's shopping list.

1. LoveFilm

The future of video is downloadable, so why is the UK Video Marketplace on Xbox 360 so rubbish? The service would be brilliant if it actually had anything worth watching.

Enter LoveFilm. It does movie downloads from major movie studios, but while it rules the DVD rental market it might not have the muscle to remain a big player when all our movies come via broadband.

The Xbox 360 has the audience, Microsoft has the muscle and LoveFilm has the movies - although if it did buy the firm, it might need to ditch the games rental service. Rentals make game developers cry, and Microsoft needs to keep developers loyal to the Xbox.

2. Spotify

From the MSN Music Store to the Zune, Microsoft's attempts at beating Apple have been largely unsuccessful. Spotify could change that and give Windows Phones a much-needed boost.

If Microsoft were to buy Spotify for a few hundred million and develop a decent Windows Phone version (and maybe stick it on the Xbox, too - why not?) it'd be a compelling alternative to both Apple's iPhone/iTunes combination and Nokia's interesting but confusing Comes With Music service.

Mark Mulligan is vice president and research director of Forrester Research. "Mobile is a massive opportunity for Spotify," he says. "Pandora and Last.fm have shown that mobile streaming can be a genuine alternative to portable downloads, and can free streaming services from the chains of the PC. However, mobile networks have some distance to go before they'll deliver a seamless experience."

Money could be Spotify's weakness. "Spotify's growth is coming from its free ad-supported offering, which is far from fully utilising its ad inventory and which is not yet pulling tier-one advertisers," Mulligan says. "That will come with time, but the possibility - probability? - remains that every new ad-supported subscriber that Spotify acquires is an additional cost. If so... can they ramp up their ad revenue more quickly than they burn through their investment money?" If they can't, being acquired by a big, rich firm could start to look very attractive indeed.

3. Kelkoo

Kelkoo is the third biggest ecommerce site in Europe, and it has the largest ecommerce advertising platform in the UK and Europe. With 8.5 million monthly users, 4,000 affiliates in the UK alone and content from 41 of the top 50 UK retailers, it's one of the most important websites around.

Yahoo bought Kelkoo in 2004 and sold it again to private equity firm Jamplant in 2008 - and rumour says Yahoo got a quarter of what it had originally paid. Microsoft could easily make Jamplant an offer it couldn't refuse, folding Kelkoo into a portfolio that includes cashback firm Jellyfish (already integrated into Windows Live Search) and shopping/product reviews site Ciao.com. Forget chasing Google in search: comparison shopping is where the money's at.