According to an unsourced rumour in the Daily Mail, British software company Autonomy may be the subject of a bidding war between Microsoft and Oracle early next year.Oracle is certainly a possibility: Larry Ellison has been on an acquisition tear in the last decade, and Autonomy’s line of software, which helps companies find and extract meaning from data scattered across many business systems, would be a good fit.
But Microsoft is an unlikely suitor for several reasons:
- Price. Autonomy’s enterprise value is about $5 billion, and a bidding war would presumably raise the price even further. Unlike Oracle, Microsoft generally doesn’t make big acquisitions. Microsoft’s largest acquisition to date was $6 billion for online advertising company aQuantive in 2007, and that was only because of a combination of unusual circumstances that don’t apply in this case.
- No big threat. One reason Microsoft was willing to pay so much for aQuantive was to counter Google’s acquisition of display ad technology provider DoubleClick, which Microsoft also bid for and lost. At the time, Microsoft viewed Google as the number-one threat to its business, and was willing to pay a huge premium to compete with Google in display technology. Microsoft views Oracle as an important competitor, but not an existential threat.
- Overlapping technology. Another reason Microsoft makes big acquisitions is to move quickly into a new market–aQuantive with online advertising, Great Plains and Navision (more than $2 billion total) for accounting software, and a handful of game studios when it got into the Xbox business. But Microsoft has already paid more than $2 billion to acquire a major Autonomy competitor, Norway’s FAST Search and Transfer, in 2008. Microsoft also has enterprise search and business intelligence products that it has built internally. If anything, Microsoft needs to cull some of these products, not add more of them.
- History of failure. Most of Microsoft’s big acquisitions haven’t paid off. aQuantive’s technology hasn’t revived the company’s online fortunes. Great Plains and Navision never turned into the $10 billion business Microsoft expected them to. And so on.
Microsoft could change its mind if Google makes a play for Autonomy’s enterprise search business. Google is still considered a top threat–witness Microsoft’s recent embrace of cloud computing, which is supposed to counter Google’s gradual move into the enterprise with Gmail and Apps. Keeping Google from improving its enterprise search offerings could cause Steve Ballmer to open the wallet again.
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