If Steve Jobs were to get hold of ARM, Microsoft would have to start from scratch, again, on its mobile strategy. On the other hand, Steve Ballmer could deal his rivals a major setback by moving first. Both the iPhone and iPad incorporate ARM's SoC design. Numerous Google Android-powered tablets, like the Motorola Xoom, also rely on ARM.
Beyond those considerations, ARM would give Microsoft its own integrated mobile stack. It's already effectively bought out Nokia for the hardware, and Nokia is a close partner with ARM for smartphones and tablets. Nokia's N900 Internet Tablet, for example, embeds ARM's Cortex-A8 processor.
Beyond ensuring that ARM's best efforts are aimed at Microsoft products, ARM would deliver another big benefit—speed to market. Redmond's tardiness when it comes to tablets and phones makes Lindsay Lohan seem punctual. Controlling the software, hardware, and chips that make up mobile devices could correct that shortcoming in a hurry. There's little doubt--to me, at least--that a Microsoft acquisition of ARM makes sense strategically. As for practical matters like cash and red tape, those shouldn't be too big a problem.
Microsoft has the dough. As of March 30, it was sitting on about $50 billion. Even with $8.5 billion earmarked for Skype, there's plenty left. When ARM was supposedly in play last year, analysts pegged its value at about $5.2 billion. It also helps that U.K.-based ARM is located overseas, where Microsoft keeps most of its money. That means the company wouldn't have to repatriate funds at punitive tax rates in order to make the deal. (That also explains why Microsoft used its foreign cash to acquire Skype, which is based in Luxembourg.)
Microsoft could also borrow at highly favorable rates if it doesn't want to bust another hole in its piggybank. IBM recently issued $1 billion in notes with a yield of just 1.25%. (Big Blue said it may use the money for acquisitions.)
But having just escaped the DOJ's thumb, would Microsoft want to risk renewed scrutiny from Washington? Despite tough talk during his campaign, President Obama doesn’t appear to be pressuring the DOJ to take a hard line on mergers. The DOJ signed off on Google's $700 million buyout of ITA Software in April, and Oracle's Sun takeover got the nod last year. Indeed, the DOJ's top antitrust cop, Christine Varney, is reportedly set to step down as soon as she can to find a good job in Silicon Valley. It’s unlikely that she’ll want to aggravate any potential future employers at this point.
Microsoft has the cash, motive, and opportunity to acquire ARM. It should act now, before somebody else does.