Microsoft's Next Bet: Logitech?

Is Microsoft (Nasdaq: MSFT  ) working on its peripherals vision? Shares of Logitech (Nasdaq: LOGI  ) climbed 6% yesterday (but have fallen 4% today), fueled by speculation that the accessory maker would become Microsoft's next buyout target.

The deal's a perfect match, when you think about it. Logitech makes PC accessories like keyboards, mice, and webcams. Microsoft makes them, too, but Logitech's accessories are just plain cooler.

They have to be. Logitech has to stand out as a third-party brand, whether on retail shelves or at industry trade shows. Even if Microsoft's accessories aren't bundled into computers powered by Microsoft's operating system -- companies like Dell (Nasdaq: DELL  ) and Hewlett-Packard (NYSE: HPQ  ) like to roll their own -- the House of Gates is a ubiquitous brand in computing.

Sure, a Microsoft wireless optical mouse is fully functional -- but it's not as slick as a cordless VX or MX laser mouse from Logitech. Microsoft's LifeCams are nice, but the best-selling webcams tend to be Logitech's handiwork. When it comes to peripherals, Logitech is Microsoft if it took bold design chances. Microsoft with personality, basically.

Unfortunately, a glance at the best-sellers on (Nasdaq: AMZN  ) or at your local Circuit City (NYSE: CC  ) will also reveal why this deal will never happen. Save for the stray Apple (Nasdaq: AAPL  ) accessory, Logitech and Microsoft hog the charts when it comes to select computing accessories.

Logitech does more than just mice; the company's huge in high-end universal remotes, and its Squeezebox digital music appliance was a hit this week at the Consumer Electronics Show. But  regulators would be hard-pressed to approve any deal that unites the two dominant players in aftermarket peripherals.

That doesn't mean the deal's not worth a shot. A Microsoft-Logitech alliance would be like Dell snapping up Alienware to spice up the former's bland boxes. Microsoft might even be able to trick Logitech into taking a fire-sale price, by spooking it into believing that Apple, with its built-in webcams, surging laptop sales, and sleek new keyboards, will eat into Logitech's future.

Don't believe it, Logitech. You're the one with the personality. Use it to charm the best price possible from Microsoft, where executives seem to be dropping out as quickly as Spinal Tap drummers. Even if the courtship is in vain, there's nothing wrong with going through the motions.

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