What's the Microsoft-Logitech Logic?

My eWEEK colleague Peter Galli offers up some solid answers to the question, in a news story posted today. Peter puts the acquisition in the right competitive context. I'd like to add another context: Consumer electronics.

As I've said before, Microsoft's real-world organizational structure doesn't match its internal and financial reporting hierarchies. Microsoft is really now three vertical silos—platforms, advertising and search and consumer electronics—supported by the horizontal silos of services and sales and marketing.

Microsoft's consumer electronics business digresses from the other two organizational silos in approach: Delivery of end-to-end hardware, software and services. It's truest example of the software plus hardware plus services model I identified last week.

Last March, I said that Microsoft had started on a buying spree, showing that it would spend whatever necessary to get ahead or stay there. Microsoft is spending big money, like it hasn't for a long time. Last week's Fast Search & Transfer acquisition, for an estimated $1.2 billion, is a good example.

Buying Logitech, or a company like it, is sensible. The PC peripheral market isn't as robust as, say, five years ago. There Microsoft mainly sells keyboards, mice and Webcams. The real peripheral demand is shifting elsewhere, particularly to gaming and mobile devices. Logitech would push Microsoft into that lucrative market and potentially provide better Windows Mobile phone, Xbox 360 and Zune peripherals. Microsoft would have better manufacturing and logistical infrastructure and relationships for future consumer electronics products.

Channel conflict is a risk, but Microsoft has produced mice and keyboards for a long time and moved into game console and music player manufacturing with little grumbling from retailers or hardware manufacturers.

Microsoft may never buy Logitech. Often, acquisition discussions go public right before a deal announcement or after preliminary talks end. In a bidding war, leaks are sometimes strategic. But Logitech would be a good acquisition for a Microsoft expanding into consumer electronics.