Has Microsoft become a SPAC?

A few days ago, a friend forwarded a research article about the importance of individual behaviour on stock prices. I strongly agree with this so read the article, but was disappointed that it treated the subject in a very superficial fashion. It then went on to discuss and recommend Microsoft as a roaring buy! It argued that Microsoft has an outstanding product list, great innovation and didnt spend money on big ticket acquisitions.

Following the skype acquisition, the analyst is probably feeling a little silly (but actually I suspect that so long as he continues to be paid, he isn't too worried!). However, it does highlight the question as to whether Microsoft is little more these days than a SPAC (Special Purpose Acquisition Company).

SPACs were popular a few years ago as listed companies that were basically cash shells looking for an acquisition candidate (or candidates) in a specific industry. Not surprisingly, few worked but many made good money for their sponsors! However, my point here is that there is surely a justification for questioning whether Microsoft has a future on its own and actually needs to spend its huge cash pile on an acquisition. If I am correct, then, as with a SPAC, it has a limited amount of time to do so.

The problem for Microsoft is that its genuine  innovation has taken place in product areas that are niche. Kinect is a great product, but it is unlikely to secure Microsoft's long term future. Their office suite remains a stellar product, but equally is coming under enormous attack from cheaper rivals.Whilst unlikely to kill 'Office' in the near term, my guess is that their margins will collapse. Windows is also under attack. Frankly, who knows whether in 5 years time we will be using 'Chrome' type OS, or iOS or 'Android' based computing devices or other OS that we haven't heard of before. My guess is that it will be none of the above, but will be something that arises out of the knowledge and confidence that there is an alternative to the desktop and that consumers and businesses will consider something other than Windows.

I remain to be convinced that Microsoft has a specific plan for Skype, and fear that it acquired it more out of fear of it falling into Google's hands. If this is the case, then Microsoft could well be split into two. The first, a declining operating business which remains profitable for a number of years,but whose valuation is a fraction of its previous multiples. The second is a SPAC in search of the next big thing. Keeping these apart may be far more sensible than looking for the new business or technology that will support the Windows/Office franchise.