30 April 2002 Microsoft is close to finalising the acquisition of Danish mid-market business applications vendor Navision. The deal is estimated at $1.2 billion (€1.3 billion) and follows Microsoft’s purchase of another mid-market vendor, Great Plains in December 2000.
The incentive for Microsoft is that Navision will give it a foothold in the European software market for small and medium-sized businesses (SMBs). Although focused on a similar market, Great Plains is far stronger in North America.
Microsoft will also gain a broad product portfolio – a result of the merger between Navision and Damgaard, formerly bitter rivals, at the end of 2001. In addition, Navision products are heavily focused on the Microsoft Windows NT/2000 platform.
This means that Microsoft will have a large number of accounting, manufacturing, distribution and customer relationship management products to sell to SMBs. Furthermore, if Microsoft incorporates .Net web services capabilities – its initiative to deliver software and services over the Internet – into Navision’s products, the boost to its web services strategy could be significant.
Meanwhile, the Navision deal could herald the start of a long period of consolidation in the European software industry. During the dot-com boom, a plethora of software vendors emerged across Europe. But since the downturn, many have struggled. At the same time, many major organisations have adopted the cautious policy of only buying software from financially stable, established vendors.
Microsoft is in a strong position to take advantage. For its 2001 financial year, Microsoft generated more than $13.4 billion in net positive cash flow and could boast total cash reserves of some $31.6 billion (€35.1 billion) by the end of it.