Microsoft interested in acquiring Logitech

Logitech's shares soared when news of a potential Microsoft buyout hit the headlines yesterday.

A report published by Reuters said that "Shares in Swiss-based computer peripherals maker Logitech International SA rose over 12 percent on Thursday amid speculation Microsoft Corp would launch a takeover bid, traders said."

If the acquisition did indeed taket place, this will make Microsoft the biggest peripheral manufacturer in the world although there might still be anti competition obstacles to clear before.

At nearly GBP 4 billion pound, a purchase of Logitech would be substantial even for a company like Microsoft and would make it the most important acquisition in the company's history.

"A Microsoft bid for Logitech would be hard to justify for both competition and strategy reasons, a source familiar and several independent lawyers" told the Financial Times.

The Swiss firm co-founder and chief shareholder was adamant though that Logitech would not be sold to Microsoft; "I am a co-founder of Logitech. Would you be willing to sell your child?" Daniel Borel told Reuters.

But there's another question that Microsoft has to answer. Why would a software company invest so much heavily in hardware which traditionally carries a high profit to revenue ratio (compared to software).

In the financial year ending 2007, Microsoft's Entertainment and Devices Division (EDD), which is home to the Xbox business and to Microsoft's peripherals, posted an operating loss of $1.2 billion for the fourth quarter and nearly $1.9 billion for the full year.