Microsoft buying SAP isn't a picnic either

Microsoft should acquire SAP instead of fooling around with Yahoo, according to Michael A. Cusumano, management professor at MIT. Does that deal make sense? Yes, but there are serious complications.

In a New York Times article, Cusumano questions the idea of Microsoft acquiring Yahoo for good reason--the opportunity costs and headaches are huge. A better move would be for Microsoft to acquire SAP in a move that's not a big leap since the two parties previously talked about a deal. Sound good? Perhaps better than a Yahoo purchase, but Microsoft-SAP isn't the perfect merger either. Here are a few reasons why:

• Regulators. Keep in mind that many of the moves Microsoft makes have the Department of Justice partially in mind. An SAP deal didn't work out before because of concerns about antitrust approval. Can you imagine the EU allowing a Microsoft acquisition of its homegrown champion SAP? No way.
• The integration of SAP would still hurt. The combination of SAP and Microsoft made sense a few years ago. At the time there was a strong case that Office could become the business intelligence window to SAP's ERP apps. Today, SAP owns Business Objects. It's trickier. And what would Microsoft do with SAP's BusinessByDesign.
• Google is still your biggest threat. Microsoft acquiring SAP does nothing for the software giant's prospects on the Internet. As Dan Farber notes SAP doesn't give Microsoft any Internet scale. In fact, a combined SAP-Microsoft really throws all the eggs in one basket.
• SAP costs too much. Microsoft would have to pay well north of $60 million for SAP. The New York Times wonders what Larry Ellison would do. He buys smaller companies that can be integrated well. Microsoft and SAP qualifies as a big bang merger that has a lot of risks. Microsoft would be better off making smaller acquisitions and then maybe build up to something huge.