Shortly after rumors that Google or even Yahoo! would eventually acquire Rediff.com (REDF: NASDAQ) or Sify Ltd. (SIFY: NASDAQ) comes chatter that Microsoft may too be interested in acquiring an Internet company like Rediff.

But according to Steve Ballmer, as quoted on Rediff.com, “There’s still a long way to that goal” of buying an Internet company.

We can see why a company like Microsoft would be so interested in eventually buying an Internet company in India on its way to becoming a “world leader among internet search engines…” After all, India is expected to see a 160% jump in Internet users, according to TheInquirer.net.

Plus, who wouldn’t want to get a piece of India’s explosive growth? Here’s a country with GDP growth of 8.9% in 2006 that, if sustained, would mark “the fourth straight year it has reached that benchmark, making it one of Asia’s fastest-growing economies after China,” according to BusinessWeek.com.

Even better, according to Bloomberg.com, “Growth in India’s economy is benefiting from Prime Minister Manmohan Singh’s decision to increase spending on roads, ports, and other infrastructure by a quarter to 992 billion rupees ($21 billion) in the year that started April 1 in a bid to attract overseas manufacturing companies and spur growth to 10 percent over a decade. That will help cut poverty in a nation where 35% of 1.1 billion people lives on less than $1 a day.”

While I expect Microsoft to expand its global presence, I don’t see it acquiring an Internet company any time soon. I’ve said it once, and I’ll say it again — Google or even Yahoo! are more likely to do that first, based on recent actions.

Like I said in a past Sleuth column, Yahoo!, for one, just inked an $8.6 million deal with Bharat Matrimony, an Internet personals site (the Indian online matrimonial market is worth an estimated $200 million), and is reportedly “hungry for more acquisitions and tie-ups,” according to BusinessWeek.com. Yahoo is so hot for India that it’s already announced “plans to launch up to six new portals in regional languages, and acquire or enter into a partnership with an Indian company,” according to Business-Standard.com. In fact, a decision on a partnership or acquisition is expected over the next six to 10 months.

My Google assumption is based on an invitation for applications from people who can “identify and evaluate acquisition opportunities across existing and future market opportunities, drive management team decisions, lead deal execution, and help manage post-acquisition integration and performance evaluation in the South Asia region, ” according to RedHerring.com.

That tells me Google’s on the hunt, too.

Good Investing,

Ian Cooper
December 5, 2006

Byron King

Prior to joining Penny Sleuth, Byron received his Juris Doctor from the University of Pittsburgh School of Law, was a cum laude graduate of Harvard University, served on the staff of the Chief of Naval Operations and as a field historian with the Navy. Our resident energy and oil expert, Byron is the editor of Outstanding Investments and Energy and Scarcity Investor.

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