Microsoft to Buy Navision for $1.3 billion

Microsoft Corp. agreed to acquire Danish
enterprise-software company Navision in a $1.3 billion
stock-and-cash deal.

In the widely
expected deal
, Microsoft offered shareholders stock and cash worth 300
kroner per share. The five co-founders of Navision control 56.4 percent of the shares, which they have pledged to the acquisition.

At the transaction’s close, which is expected in August, Navision will fall under
Microsoft’s business solutions division. Navision’s Vedbaek, Denmark
headquarters will become Microsoft’s base for its European, Middle Eastern
and African (EMA) business solutions operations.

The Navision acquisition will buff up Microsoft’s enterprise offerings,
particularly in Europe. Last December, Microsoft shelled out $1.1 billion in stock to buy Great Plains Software, a Fargo,
N.D.-based enterprise-software company. Combined, the business solutions
division will have 3,600 employees.

Both Great Plains and Navision serve small-and medium-sized companies, but
mostly focus on their domestic markets: Great Plains does 80 percent of its
business in the U.S. and Navision does 86 percent of its business in Europe.

“This is a natural step for Microsoft to continue to provide solutions for companies on a small and mid-market basis,” Doug Burgum, Microsoft Great Plains president and Microsoft Corp. vice president, said in a conference call.

As Europe’s fifth-largest enterprise resource planning (ERP) company,
Navision will give Microsoft a foothold in Europe to challenge traditional
enterprise powerhouses on the continent, such as SAP, and local competitors,
like U.K.-based Sage. IDC has forecast the European ERP market will grow
from $15 billion last year to $24 billion in 2005, with growth by small-and
medium-sized businesses leading the way.

“It gives them a little bit more ability to go upstream a little more, a little larger enterprise than Great Plains gave them,” said Gartner analyst Charles Eschinger.

Navision was formed after merging with rival Danish software company
Damgaard in December 2000. The company has 1,200 employees and 30 offices,
mostly in Europe, with 130,000 customers. Last year, it had $181 million in
revenue, a 19 percent increase from a year earlier. This year, Navision expects to take in $210 million.

Navision already had an alliance deal with Microsoft to develop enterprise
solutions based on the .Net platform. It offers applications in four main
products: Axapta, an ERP and e-business application; Financials, a
financial-management tool; Attain, an enhanced financial-management tool;
and XAL, e-commerce software. Navision Financials and Attain accounted for
61 percent of the company’s revenues in the first half of the year.

Burgum said decisions about integrating product offerings would come after the deal closes, but he said Microsoft is committed to Attain and Axapta. He added that Microsoft was still on track to roll out a CRM product by the fourth quarter.

Navision’s co-CEOs, Jesper Balser and Preben Damgaard will remain at the
company, with Balser serving as director of global strategy and Damgaard
heading the EMA business solutions operations. The company’s other founders all plan to join Microsoft.

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