informa
/
2 min read
Feature

Microsoft Courts Danish Software Vendor

A potential acquisition of Danish software developer Navision could help Microsoft expand sales to small and midsize companies in the business applications market and give it access to 2,300 new resellers, mostly in Euro
A potential acquisition of Danish software developer Navision could help Microsoft expand sales to small and midsize companies in the business applications market and give it access to 2,300 new resellers, mostly in Europe.

Microsoft (MSFT-Nasdaq) is talking with Navision (NAVI.CO-Copenhagen), which makes enterprise resource planning software for customers with $5 million to $250 million in annual revenue, about buying the company for at least $1.2 billion, according to the Financial Times. Navision had $185 million in revenue for the fiscal year ended July 31, 2001.

Neither Microsoft nor Navision have commented on the discussions, which pushed Navision shares higher on the Copenhagen Stock Exchange last week. Navision's board issued a statement saying the company is considering a "strategic transaction."

Navision and Microsoft "work very closely together" on technical matters, sales, and marketing, John Frederiksen, president of Navision's U.S. subsidiary, says. Nearly all Navision products run on Windows, and its resellers sell Microsoft's SQL Server database. Frederiksen wouldn't comment on a possible Microsoft acquisition. Navision, which has operated in the United States since 1995, hasn't achieved the growth it had hoped for here, he says. "The big challenge is we have to become more known in the U.S. marketplace."

Microsoft could help. It's already in the U.S. ERP apps midmarket, having bought Great Plains Software last year for $1.1 billion. Navision's Attain and Axapta products compete with Great Plains' offerings; however, Navision books more than 80% of its sales in Europe.

With nearly $39 billion in cash and short-term investment on its balance sheet, Microsoft can certainly afford the deal. Though it's lost money recently on equity investments made with that horde, Microsoft is still looking for deals that will improve growth, which has slipped below what the company has historically enjoyed. Microsoft's sales of enterprise software grew less than 2% during its third quarter ended March 31, and overall revenue increased 13%, less than analysts had expected.

If the Navision acquisition takes place, it may help show investors that Microsoft "actually has a game plan about how to re-start growth at the company," says an investor at a large mutual fund. But if it buys Navision, Microsoft needs to be careful not to jeopardize partnerships with vendors such as SAP and Siebel Systems that compete with Navision.