Microsoft plans to buy Internet phone service Skype for $8.5 billion in cash, a rich price to regain ground on its fast-growing rivals. But Cramer on Tuesday suggested Microsoft picked the wrong takeover target.
"If Microsoft had bought something that is sizzling, then I think that what would happen is they would actually go up instead of down," the "Mad Money" host said. "Microsoft needs to step up the x-factor."
The Redmond, Wash.-based company should have bought Netflix , Cramer argued. Netflix, like other Internet-based companies, has a very rich valuation. Gilt.com is valued at $1 billion while LinkedIn is valued at $3 billion. Nobody would be complaining had Microsoft overpaid for Netflix, Cramer said. After all, Netflix is a $12 billion company, but Microsoft could have bought it for roughly $8 billion just a short time ago.
Cramer stopped short of saying he doesn't like Microsoft's stock. He did, however, say it lacks growth—the only thing that gives a stock value. The only way to get growth is by breaking up a company, or by getting taken over. To him, it doesn't seem as though Microsoft is doing either.
—Reuters contributed to this report
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