Microsoft Makes Fast Move
Microsoft bids $1.2 billion for Norwegian search company to shore up search technology.
Microsoft Corp. has agreed to buy a Norwegian search company for $1.2 billion, aiming to shore up its search technology for businesses against competition from Oracle Corp. and IBM Corp.
Microsoft's cash offer of 19 kroner ($2.97) per share for Fast Search & Transfer ASA represented a 42 percent premium over the stock's Jan. 4 closing price.
Fast, a 10-year-old company based in Oslo, is one of the biggest enterprise search players. Its technology, like those of competitors Autonomy Corp. and Endeca Technologies Inc., helps workers inside a business locate data kept in a tangle of different types of files and databases.
It could, for example, find benefits information posted on a company intranet, an annual report from five years ago buried in a folder on a file server, the name of a colleague with a certain expertise or figures from software that tracks customer relationships.
Beyond that, Fast and its high-end competitors let programmers at big businesses build custom applications, such as powerful industry-specific search engines or Web sites that display content generated dynamically by searches behind the scenes. For example, Best Buy Co.'s Web site uses Fast technology to refine product searches by different criteria, like manufacturer or size, based on available inventory.
In 2007, Fast's share price sank after accounting problems and a restructuring that took a big bite out of earnings. In the third quarter, Fast posted a loss of more than $100 million.
Jeff Raikes, president of Microsoft's business software division, said in a conference call that Microsoft was fully aware of the accounting issue and that its depressed stock price did not factor into the decision to buy.
"We looked at a variety of companies in the marketplace," Raikes said. "We feel very strongly that Fast has the best team of people, the best technology."
Microsoft has its own stable of enterprise search technology, including a search server product and the search function built into its Sharepoint collaboration platform.
Raikes described Fast's products as more sophisticated and able to perform more-detailed searches, sift smartly through more types of files and handle more documents _ billions, instead of millions.
"It's our belief that this is a very hot, fast-growing area," Raikes said. "We believe it will be for workers tomorrow what Internet search is for consumers today."
Forrester Research analyst Ken Poore called the buyout "a big deal." In an interview, Poore said Microsoft's search strategy has been weak, leaving the software maker trailing behind not only big players like Fast, but also Oracle and IBM, who have been investing in the technology in recent years.
"By going out and acquiring Fast, in my opinion, they've kind of leapfrogged" IBM and Oracle, Poore said.
Jim Murphy, an analyst for AMR Research, said the acquisition was made in large part to protect Microsoft from encroaching competitors. He speculated that the high purchase price was driven by competing bids _ perhaps including Oracle, who, along with SAP AG, doesn't want to see its own customers paying for a third-party tool to search its database.
While Microsoft and Fast executives focused mainly on business search in comments Tuesday, Fast also has roots in the consumer Web. Its search engine, AlltheWeb.com, was folded into Yahoo Inc. through an acquisition.
Just last year, Fast launched a Web advertising network to challenge Google Inc.'s dominance in the very lucrative ad arena.
Microsoft would not say how its own Web search and advertising business, which lag far behind Google's in terms of traffic and revenue, will benefit from the acquisition.
According to a statement, Microsoft will make a formal offer next week. Fast's board of directors and shareholders representing 37 percent of outstanding shares have already signed off. The deal is expected to close in the second quarter, pending further shareholder and regulatory approvals.