Is $1 Billion Price Tag Justified For Microsoft Corporation (NASDAQ:MSFT) To Buy Mesosphere?

Reports indicate that Microsoft Corporation (NASDAQ:MSFT) is interested in buying out Mesosphere, a cloud infrastructure startup. Further reports cite that Mesosphere is valuing itself at $1 billion, which raises the question about whether such a lofty price is justified for Microsoft to pay. Mesosphere provides technology called Mesos, which simplify the management of data centers, something that Microsoft would really love to own, given its aggressive focus on cloud computing.

Sources are giving away hints about where Microsoft would like to spend its next billion dollars, but the company has kept mum for the most part. It is emerged that Microsoft has been holding talks with Mesosphere in what could end up in an acquisition deal. Microsoft has recently been training its eyes on various cloud assets, including Docker and now Mesosphere.

In the case of Mesosphere, its Mesos technology enables companies to easily manage their data centers through a simplified dashboard. Mesosphere has been described as one of the fastest growing startups in the cloud infrastructure management space, which makes it a suitable buy for a legacy technology company like Microsoft.

Benefits of using Mesos

Twitter Inc (NYSE:TWTR) is one of the companies that use Mesos to manage their data centers. In addition to enabling simplified data center management, Mesos also improves data center efficiency, saving customers a lot in terms of costs.

Cause for concern

Nevertheless, Microsoft Corporation (NASDAQ:MSFT)’s recent troubled acquisition of Nokia Corporation (ADR) (NYSE:NOK)’s handsets division is a cause for concern. Questions are emerging about whether the company should pay what looks like a huge premium to get its hands on Mesosphere.

The option to partner

Because Mesos is an open-source technology, several tech companies have been seeking partnerships with Mesosphere to tap into the power of its technology. By partnering, these companies are avoiding outright buyout of the startup while still benefit from Mesos.

Partnering may offer a safer way for Microsoft Corporation (NASDAQ:MSFT) to benefit from Mesos, but ownership of the technology is a much better alternative. Also, given the potential of Mesos, the $1 billion price tag doesn’t look like a really lofty valuation, except if things don’t turn out to be as good as they look.

Neha Gupta

Neha Gupta has been in the financial space for over six years now. Gupta earned her MBA degree from Symbiosis Centre of Distance Learning in 2009 and her passion for finance led her to pursue Chartered Financial Analyst (CFA) course. She has successfully completed Level II of her CFA. She is a veteran in article writing, which is depicted in her numerous pieces published on SeekingAlpha, Nextiphonenews, InsiderMonkey, MarketWatch, and Techinsider. Her crisp and eloquent writing finds its best place in Researchcows, where emphasis is given on developing rich content for various websites, products, business plans, trainings, and book writing.

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