Microsoft Shells Out $486M for Research Firm
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In an effort to shore up its search and e-commerce businesses in Europe, Microsoft today announced that it will acquire Greenfield Online, a research firm that operates shopping comparison sites, for about $486 million.
Greenfield, based in Connecticut, owns Ciao.com, a popular shopping portal in Europe, where Microsoft (NASDAQ: MSFT) is looking to expand its Live Search business.
"The team at Ciao has built a passionate consumer community based on intuitive technology and extensive merchant relationships that we believe will deliver incremental benefit to the Microsoft Live Search platform," Tami Reller, Microsoft's vice president and CFO for windows and online services, said in a statement.
Ciao is something of a social networking community themed around shopping. In addition to the reviews and price comparisons, Ciao features advice from shopping experts and profile pages where members can register their product preferences and write on each other's walls. The site earns revenue from selling ads and retailers that pay to place a link to their stores on the portal.
The latest acquisition follows Microsoft's failed bid to buy out Yahoo (NASDAQ: YHOO), which Microsoft had pursued aggressively through the first half of the year in an attempt to better compete with search leader Google (NASDAQ: GOOG). After four dramatic months of stop-start negotiations, talks formally ended in June after the companies were unable to agree on price.
Domestically, Microsoft holds 9 percent of the search market compared to Google's 62 percent, according to online metrics firm comScore (NASDAQ: SCOR). Microsoft's position is even slimmer in Europe, where it performs just 2 percent of all search queries and Google enjoys a commanding 79 percent market share.
Microsoft also trails Russia's Yandex and eBay (NASDAQ: EBAY) in search queries in Europe, according to comScore.
The purchase follows Microsoft's acquisition of Farecast, a site that allows people to compare air fares, the software giant's most recent move toward building out its e-commerce platform. Standard & Poors analyst Jim Yin said that Greenfield will be a solid addition to Microsoft's still-nascent Internet services unit.
"We think [the Greenfield] purchase would strengthen Microsoft's online platform and is consistent with strategy of simplifying tasks related to online transactions," Yin wrote in a research note. "We see long-term benefits of increased investment, but project losses in Microsoft's online service business for next couple of years."
While Microsoft sees the deal as a way to build out the Live Search platform, Greenfield's chief business is the Internet survey solutions (ISS) division, which conducts market research surveys.
Microsoft said that it had found an unnamed buyer to acquire the ISS division, which accounted for more than half of Greenfield's net revenue last quarter.
Microsoft's offer of $17.50 per share trumps an earlier bid for Greenfield (NASDAQ: SRVY) from Quadrangle Group, which had entered into formal agreement to purchase the firm for $15.50 per share. Greenfield will pay Quadrangle $5 million for terminating the merger.
Greenfield had announced on Aug. 26 that it had received a better offer and was canceling the Quadrangle deal, but it did not name the buyer.
Microsoft expects the purchase of Greenfield and the disposal of the survey business both to close in the fourth quarter.