Microsoft to buy Navision

Microsoft Corp. has agreed to buy Danish business software developer Navision A/S in a transaction valued at about US$1.3 billion, the Redmond, Wash., software giant said Tuesday.

The deal, about which rumours first surfaced last week, will boost Microsoft’s business-software offerings for small- and medium-sized customers. Navision makes software for managing supply chains, finances and customer relationships. A year ago, Microsoft bought Great Plains Software Inc., an application vendor in Fargo, N.D.

“Today’s announcement is really about bringing those two strong companies (Great Plains and Navision) together,” said Jesper Balser, one of Navision’s two chief executive officers (CEOs) on a conference call with analysts and reporters.

Great Plains and Navision are a nice fit, both from an operational standpoint and geographically, Balser said. Great Plains has a U.S. focus, while Navision does the bulk of its business in Europe. Both companies sell their products through VARs (value added resellers).

The acquisition fits with Microsoft’s plans to move into the enterprise applications arena, said Lars Schwaner, a research analyst with IDC in Copenhagen.

“Microsoft has not traditionally had a strong focus on enterprise applications. This acquisition shows that Microsoft really is focusing on this space,” he said.

Navision’s board of directors has recommended the takeover to the company’s shareholders. Microsoft will invest in Navision’s products and will extend sales, marketing and development support as well as technical resources to Navision partners, Navision said in a filing with the Copenhagen stock exchange.

Balser and Microsoft Great Plains President Doug Burgum on the call dismissed concerns about potential friction because of the partner base. Microsoft, for example, has partnerships with Navision rivals SAP AG and The Sage Group PLC, while Navision has teamed with IBM Corp.

“We would expect existing partnerships to continue to exist and hopefully continue to be enhanced. We have to both collaborate and compete. That is both the same for IBM and SAP,” Burgum said. Added Balser: “I don’t expect this announcement to have any effect on partnerships.”

Existing Navision customers won’t see any major changes soon, but product development at the Danish software house will speed up, said Cees Poortman, managing director for Navision in the Netherlands.

“Customers won’t see any drastic changes in the short term. This deal strengthens our continuity and product development. The bundling of technology will increase the speed at which we bring products to market,” he said, noting that Navision was already working on products for Microsoft’s .Net platform of integrated software.

“Being a part of Microsoft is the ultimate protection for our own, our investors’ and our customers’ investments,” said Navision co-CEO Balser.

Details on product plans won’t be disclosed until August, when the transaction is expected to close, Burgum said.

“We will articulate product positioning at the time the transaction closes, but we are offering a full commitment to the Navision product line,” he said.

IDC’s Schwaner said the deal benefits all involved.

“Microsoft gains access to a very interesting and growing European market, while Navision gets access to a strong brand, a strong marketing machine, cutting-edge technology and capital, which is important when you have players such as SAP trying to enter the market as well. This acquisition will enhance the competition in the European market,” he said.

Microsoft offered 300 kroner (US$37) in cash or stock per Navision share. The offer represents a premium of 36.7 per cent over the last quoted share price before Navision confirmed it was considering a “strategic transaction” on April 30. Shareholders representing 60.05 per cent of the voting rights and share capital have already agreed to the offer, Navision said.

Navision does the bulk of its business in Europe. The continent accounted for 79 per cent of its revenue reported for the quarter ending March 31. The U.S. market accounts for 14 per cent of Navision revenue, with the rest of the world taking 7 per cent.

Navision Financials accounted for 60 per cent of worldwide revenue. Navision Axapta, the company’s Web-based suite of electronic business software, accounted for 17 per cent.

Navision will become part of Microsoft’s Business Solutions division. Its headquarters in Vedbaek, Denmark, will become Microsoft’s largest product development centre outside the U.S. and the centre of development and operations for the Business Solutions division for Europe, the Middle East and Africa, Microsoft said in a statement.

Navision’s two chief executive officers, Balser and Preben Damgaard, will take on new roles at Microsoft Business Solutions. Balser will be director of global strategy, while Damgaard will be director of EMEA operations. Both will be based in Vedbaek, Microsoft said.

Microsoft will also take on all of Navision’s employees, around 1,200 in all, Navision said.