Microsoft-SAP takeover exposed

By DAMIAN REECE

Microsoft revealed yesterday that it had planned to acquire SAP, one of its biggest technology rivals, in a deal that would have given it dominance in the specialist business software market.

Talks between the two, initiated by Microsoft, began last year, said Microsoft.

A spokeswoman for SAP said Microsoft had "ended the talks in March or April".

News of the talks emerged in the pre-trial discovery process in the case brought by the United States Justice Department against Oracle's US$7.7 billion ($12.2 billion) acquisition of PeopleSoft.

The Microsoft-SAP talks are expected to be used by Oracle as justification for its purchase of PeopleSoft.

Although Microsoft's plans for SAP would have most likely struck problems with competition regulators, they reveal for the first time Microsoft's willingness to contemplate large acquisitions as a way of growing its business, after decades of organic growth.

Microsoft, founded by Bill Gates, is sitting on a US$56.4 billion cash pile and is under pressure to use the cash or hand it back to shareholders.

Analysts have been pondering how Microsoft will carry on generating the kind of growth it has enjoyed since its formation in 1975.

Its dominant market position means it is facing greater regulatory challenges as well as increased commercial competition.

A takeover bid for SAP would have involved Microsoft paying more than US$60 billion for the German-based company, which has a market value of US$52 billion, compared with Microsoft's US$283 billion.

SAP's stock price was up 2.22 per cent yesterday following the revelations.

Last month Microsoft and SAP announced moves to increase interoperability between SAP's web-based software solutions and Microsoft Office.

- INDEPENDENT