OPINION
How Would You Spend Microsoft's $40 Billion?

It's that time of year again: Radio stations around the country are giving away prizes to lure listeners. The shopping spree is always a big favorite. The idea of spending US$10,000 of someone else's money is quite appealing.

But why stop there? Bill Gates and Microsoft (Nasdaq: MSFT) reportedly have as much as $40 billion in cash. That has not escaped the notice of analysts, who have gone out on a limb and predicted an acquisition spree over the next several years.

If Microsoft really goes shopping, it will have to do so very carefully. If Gates buys a pack of gum, he's likely to be accused of monopolizing chewing. But let's leave that aside and indulge in fantasy for a while.

Gates has yet to start writing checks, so the slate is clean. How should Microsoft spend its billions?

Decisions, Decisions

The first thing you should know is that not everything is on the table when you're shopping with a $40 billion credit limit. Valuing companies is tricky business, and investment bankers make (and lose) big money trying to figure it out. While market caps are not true indicators of a company's worth, they're a pretty good ballpark estimate.

For instance, Dell and the new HP-Compaq, at between $60 billion and $70 billion each in market capitalization, are both a little too pricey, as is AOL ($80 billion). But GM's market cap stands at just under Microsoft's limit, so if we were inclined to spend it all in one place, we could come away with a car maker.

Penny Candy

But let's buy in bulk instead. By staying within the e-commerce arena, we could put together quite a gift basket.

For instance, eBay's (Nasdaq: EBAY) market cap is about $14 billion, so presumably we could buy that, plus Amazon (Nasdaq: AMZN) ($6.5 billion), and still have half our money left over.

Why not splurge? Yahoo! (Nasdaq: YHOO) has a $10 billion market cap, and if I were Microsoft and the world were my oyster, I'd scoop it up.

If nothing else, doing so would cut off the endless barrage of press releases about which portal has more unique visitors or unique visits or however they're choosing to measure it this month.

Besides, Yahoo! does many things better than MSN -- such as stock quotes.

Fun and Games

So, we've got our portal, our gateway to the Web. Now we need something fun to do when we get there. Gates doesn't exactly seem like the athletic type, so a sports franchise (well under $1 billion) is probably out of the question. I just can't picture him sitting behind the bench shouting at the referees a la Mark Cuban.

What does Gates do for fun? He likes to give money away -- we know that -- and what easier way to give it away then to put it into someone else's PayPal account? With a market cap of $1.5 billion or so, PayPal's outstanding shares could be grabbed for pocket change. PayPal is a great thing to have if you're controlling the online universe, anyway.

Travel? Microsoft has already sold all but a sliver of Expedia (Nasdaq: EXPE). Should it get back in? Let's skip it. The party can only go on so long in that sector before one or two winners emerge and the rest go slinking home bruised and battered. Maybe in five years Microsoft can buy the winner or number two.

But not just yet. On second thought here's Priceline (Nasdaq: PCLN), right next to the National Enquirer at the checkout counter. An impulse buy with a $1 billion price tag.

Not Done Yet

That little e-tail spree cost about $33 billion, so we're not done just yet. The real spending can best be done offline, anyway. As noted, the big computer companies are a little too rich for our blood. But maybe we should grab Gateway ($1.8 billion). We could replace the company's cow-colored boxes with that cool Windows XP green-fields-and-blue-sky effect.

Getting close now. Gates has been pilloried in the press, and one quick way to fix that is to own the press. I don't know if Bill ever had a sled as a kid, but he could do Citizen Kane proud by buying Dow Jones ($4.6 billion), which would give him The Wall Street Journal.

There might still be a few stray million hanging around, but we can save that for a rainy day. Or maybe put everything back on the shelf and start over again. Come on, Bill, this buying spree stuff is fun.

Try it yourself; you'll like it. What do you think Microsoft should buy with its $40 billion?