• The New York Times, Monday, February 25, 2008 11 AM

Microsoft, "having exhausted its best ideas on how to deal with Google," is looking downright desperate in its bid to acquire Web giant Yahoo. The newspaper recommends Microsoft should forget about competing with Google and look to strengthen its lucrative enterprise software business.

What Microsoft does best is sell software to corporations--approximately half its revenue comes from business customers. Attempts to sell advertising lose money. If Microsoft wants to go out and make a huge acquisition, it should look for a company that also sells software to businesses. The suggestion: SAP, the No. 1 provider of enterprise software.

Enterprise software is a relatively new area for Microsoft. This is the business of providing an infrastructure for companies to build the software that runs their businesses. Microsoft's enterprise suite, dubbed Microsoft Dynamics, is small-time compared to bigger providers like SAP and Oracle, but an SAP acquisition would immediately establish Microsoft as the leader in that market. It wouldn't come cheap though: the German software giant has a market cap of approximately $59 billion, and Microsoft would have to pay a hefty premium.

Read the whole story at The New York Times »