Report: Microsoft poised to buy Navision

Navision A/S has confirmed that it is considering a "strategic transaction," after a story in Tuesday's Financial Times (FT) newspaper reported that Microsoft is close to completing negotiations for the purchase of the Danish software company.

Microsoft is expected to pay about US$1.2 billion for the company, the FT said. It spent $1.1 billion on a U.S. business software developer, Great Plains Software Inc., last year. Both Navision and Great Plains develop business planning software for small and medium-size companies.

Navision released a statement in response to the rumors, saying that it "can confirm that it is considering a possible strategic transaction." Director of Corporate Communications Søren Christensen would not expand on this, saying that "'strategic transaction' is a deliberately broad term that could cover many things and I cannot add anything to the wording."

Microsoft, likewise, would not comment on the report.

Christensen would not give any likely timing on negotiations, saying only that they "may result in an agreement on the proposed deal or they may not. We will release more information if and when there are more developments."

While noting that the deal has not been confirmed by either company, one analyst said buying Navisoft would make sense for Microsoft. The deal would bring it products that are familiar to small and medium-size businesses in Europe, where Great Plains is not as well known, said Nigel Montgomery, European research director for AMR Research Inc. based in London.

"Great Plains, by all accounts, doesn't suit the European market well and doesn't have a position here at all," he said. "For Microsoft to be credible in Europe it needs a product for this market, or it needs to flesh out the functionality of Great Plains to satisfy the European market."

While Microsoft has plenty of talented programmers, it lacks specific knowledge about the way small and medium sized companies do business in Europe, he said. Buying Navision would bring it not only a product tailored for European markets but also a network of some 2,000 systems integrators and resellers that have ties to European businesses and know how they work.

A deal would also help Microsoft better compete with SAP AG, particularly with software for smaller businesses that the German software maker recently acquired from Israel's TopManage Financial Solutions Ltd., Montgomery said.

If it turns out that Microsoft is not courting Navisoft, other possible suitors include business software makers J.D. Edwards & Co. and SSA Global Technologies Inc., each of which could benefit from Navisoft's small business software, he added.

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