[legion]

Microsoft has jumped the shark.

Up until this point, Microsoft has usually bought other companies to fill out its product portfolio--not usually direct competitors. Even the acquisition of FoxPro was really about making Microsoft's DB products better.

As soon as I was hearing people justify the merger as "needed to compete against Google", alarm bells started going off in my head. This has simply NEVER worked.

I expect this to play out like every mega-bank merger (bank A and B merge to compete with bank C), the HP/Compaq merger (to compete with Dell), the Sears/Kmart merger (to compete with Wal-Mart), and just about every other "big" merger over the past 15 years:

First it will be touted by the executives as "combing our strengths" (they might even be bold and use the word "synergy").

Then a lot of people will be fired "to eliminate redundancies".

A year on, the executives will say that the merger "was more complex than we anticipated".

Two years on the executives will "admit that there were many unforeseen challenges". Shortly after, many executives will be fired by the board. The share price of Microsoft will decline steadily during this whole fiasco.

A new CEO will be hired to "move the company away from the troubled past" and to "set a new course". If the shareholders are lucky, a Travelers/Citi-type split will occur, effectively undoing the merger. If not, the "once high-flying company" will be gobbled by a competitor. (CA? Oracle? IBM?)

Can you hold a short position for two years?