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Microsoft to acquire Fast Search & Transfer for $1.2b

Microsoft has bid $1.2 billion for enterprise search and business intelligence vendor Fast Search & Transfer ASA as it seeks to capitalize on the burgeoning market.

Microsoft Corp. has bid $1.2 billion to acquire Fast Search & Transfer ASA, the Norwegian-based enterprise search and business intelligence (BI) vendor, the companies announced Tuesday.

While the acquisition itself was not completely unexpected, the price tag came as a shock to one analyst. Still, the move could prove a lucrative one as the enterprise search market is poised for growth.

Representing a 42% premium, the $3.54 per share offer is the latest in a string of acquisitions in the ever-consolidating BI market. Last year, Oracle bought corporate performance management specialist Hyperion, while SAP and IBM are awaiting approval to acquire BI vendors Business Objects and Cognos, respectively.

Enterprise search software and applications help employees locate documents and other data often hidden deep inside corporate networks and databases. When integrated with BI, enterprise search tools can help end users find reports and information faster, according to a 2007 report from the Data Warehousing Institute.

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IBM acquired its own enterprise search vendor, iPhrase, back in 2005, while Oracle, with Secure Enterprise Search, and SAP, with NetWeaver Enterprise Search, continue to develop their own enterprise search offerings.

Microsoft is no stranger to enterprise search itself. The company launched two low-end enterprise search appliances, SearchServer and SearchServer Express, in November.

In a conference call, Jeff Raikes, president of Microsoft's Business Division, said FAST's more complex search technology, once integrated with Microsoft's SharePoint Server, will allow customers to conduct more sophisticated searches of larger data volumes.

"SharePoint today searches … millions and millions, tens of millions of documents, but higher-end search covers billions of documents," Raikes said. "If you take what FAST has in higher-end search, with the scalability, the sophistication of the development platform, it's a great compliment to what we do."

FAST chief executive John Lervik said Microsoft's vast network of partners and customers will allow FAST to expand far beyond anywhere it could have reached on its own.

"We've been dreaming about how we can take our technology and really deploy it in a much wider place and this is our dreams coming true from that perspective," Lervik said in the conference call.

While exact figures are hard to come by, Jim Murphy, analyst with Boston-based AMR Research, estimates the enterprise search market somewhere between $3 billion and $5 billion dollars, making FAST's $1.2 billion selling price all the more remarkable.

"I was initially blown away by how high the price was," Murphy said.

But Murphy said the investment could pay off as there's a "huge pent-up need" for the more robust enterprise search capabilities that FAST offers. The acquisition of FAST will also help Microsoft close the gap between "simplistic, pre-built, shrink wrapped search capabilities that you're getting from Google's [enterprise search] appliance and now IBM-Yahoo's OmniFind," Murphy said.

The acquisition of FAST doesn't immediately make Microsoft the top vendor in the enterprise search market, however.

"I think it makes them the gorilla in the room, but they'll have to do a lot to execute," Murphy said. Autonomy "remains the leader in the market even given these encroachments," he said.

Murphy also expects to see more acquisitions in the enterprise search market as the larger battle for supremacy in the business intelligence and enterprise software markets plays out. He said Oracle and HP were likely to make moves on smaller enterprise search vendors in the year ahead, with Endeca and Autonomy, in particular, likely targets.

Raikes declined get into specifics about how or when Microsoft would incorporate FAST's technology with SharePoint, or if Microsoft planned to integrate FAST technology with Microsoft Live or any of its other products.

Microsoft said the acquisition will also expand its research and development operations in Europe.

Founded in 1997 with U.S. headquarters in Needham, Mass., FAST employs over 700 people and reported $162 million in revenue in 2006, according to its latest annual report. FAST's board of directors unanimously recommended approval of the offer to its shareholders, according to the release.

For the deal to go through, Microsoft needs approval by at least 90% of FAST shareholders. According to the release, 37% of shareholders – including FAST's two largest institutional shareholders, Orkla ASA and Hermes Focus Asset Management Europe –- have already committed to the offer.

The companies expect to finalize the deal during the second quarter.

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