Microsoft is moving to improve its enterprise search capability by acquiring Fast Search and Transfer, a Norwegian search engine company with U.S. headquarters in suburban Boston. Microsoft said Tuesday it will pay about $1.2 billion for Fast.
Microsoft indicated Fast's search capabilities will integrate well with its Microsoft Office SharePoint Server. The cash deal represents a 41% premium over the last trades of Fast stock.
Noting the growing importance of enterprise search, Microsoft's Jeff Raikes said organizations have traditionally been "forced to choose between powerful, high-end search technologies or more mainstream infrastructure solutions", and the Microsoft-Fast combine will enable users to deal with a single vendor for a variety of search options. Raikes is president of the Microsoft Business Division.
"By joining Microsoft, we can benefit from the momentum behind the SharePoint business productivity platform to really empower a broader set of users through Microsoft's strong sales and marketing network," said John Lervick, Fast's CEO, in a statement.
The future of Fast became the subject of debate in recent months ever since Joseph Krivickas joined the company in July as president and chief operating officer. There was much speculation that the company was being positioned for sale when the company released details in August of an internal reorganization aimed at streamlining its operations around key market sectors and core technologies.
"Krivickas did his job well," said Stephen Arnold, a search engine expert who is managing director of Arnold IT. "The institutional investors were putting pressure on; now they have a big payday." In Tuesday's announcement, two large Fast investors, Orkla ASA and Hermes Focus Asset Management Europe, were cited as "irrevocably" supporting Microsoft's offer; they represent about 37% of Fast's ownership and investment banking analysts said they expect the deal to be approved by a majority of Fast's stockholders.
Fast has always been praised for superior technology, but it has grown in a patchwork manner. Arnold said Fast's growth wasn't "organic" and consists of "original code, open source code, code from acquisitions -- all done over the last four or five years." The challenge for Microsoft, he added, will be to pull it all together. Fast, for instance, has different Linux cluster technology features that will have to be integrated into SharePoint.
In the deal, Microsoft picks up some 2,500 to 3,500 customers including several blue chip companies. Fast carved out a strong niche for itself in publishing. It appealed to firms with advanced technology like Symbian OS, which it landed as a customer in September for its Fast ESP, its flagship enterprise search platform.
"Microsoft has bought something very complex," said Arnold. "Fast has some very, very good people, but now they'll be getting a nice payout and they could leave."
Arnold, who recently completed a study on enterprise search called "Beyond Search" for the Gilbane Group, said the acquisition offers a big opportunity for Microsoft to improve its position in enterprise search. "It's an opportunity to counter some of Google's enterprise efforts," said Arnold. "But it's going to take some time."
In his recent enterprise study, Arnold found that more than 60% of enterprise search customers across-the-board are "disappointed or very disappointed" in the enterprise search technology they currently use and that spells opportunity for Microsoft to make gains in the area.
Microsoft said the acquisition of Fast, based in Norway, will complement its existing R&D presence in Europe, where it currently operates research teams in Cambridge, England, and Copenhagen, Denmark.