Another merger idea

Everyone knows Microsoft (MSFT), the largest and best software company in the world. If you are following my blog, you know how much I like MSFT and I’m still thinking MSFT is at a good value at this price and should be added into your retirement portfolio if you haven’t done so. Actually I wish MSFT share price will not go crazy and go up significantly from here, since its low stock price will allow me to extract a lot of income again and again.

Today I have a crazy idea that I think MSFT will buy SAP (SAP) soon.  SAP is a Germany software company which I knew over 10 years ago. I made some money initially but lost a lot during the dot.com crisis. Now I think SAP may become a good acquisition target for Microsoft. I bet not many of you know SAP but it is the largest ERP software in the world. ERP or Enterprise Resource Planning is widely adopted by major companies in the world as it will help and facilitate companies to get an integrated, real-time view of their core business processes and efficiently manage such data throughout every stage of their business. While MSFT is most popular with its consumer software (such as Windows, Xbox, Windows Phone, Surface etc), it is actually also the 3^rd largest ERP software company with business software such as Azure, Office 365, Windows Server, Dynamics etc. MSFT has a clear strategy to expand its business software business by creating the cloud platform Azure. Actually MSFT’s Azure can also support SAP’s applications, which can allow SAP users to easily reconfigure their SAP products to be run in Azure as necessary. More interestingly, MSFT has already started the partnership with SAP in enterprise cloud computing, mobile devices and other areas. Quite often, successful partnership can trigger the merger idea if the great profit prospect is foreseen. One good example is the acquisition of Medarex by Bristol-Myers Squibb. Now everyone knows the first ever leading immune cancer drug on the market, ipilimumab, which is a product from Medarex.  Initially, Medarex was in partnership with BMS for ipilimumab and when it was close to its approval, BMS saw the huge commercial potential of ipilimumab as well as a large pool of antibody products and decided to simply buy out Medarex. This is probably the main reason why BMS has become the leading company in the totally new oncology field: immunotherapy for cancers. If MSFT buys out SAP, it will also become the leading ERP software company, which to me makes a lot of business sense. I bet MSFT is likely also considering this as it is transforming itself at the moment from a customer-software-dominating business more into a business-software company.  Buying SAP is not a bad idea for this potential merger.