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Tuesday, January 08, 2008

Microsoft Set To Acquire FAST Search

Microsoft announces intent to acquire FAST search. FAST, one of the significant player in the enterprise search space post the Verity acquisition by Autonomy, now bites the dust. FAST has had some financial woes of late – but it has good technology capabilities and a large customer base. FAST specializes in enterprise search –particularly centered around unstructured data and has a enterprise scale application with good deployments to showcase. Microsoft has indeed made the right move. The valuation is at around 6X EV/Sales. Clearly, the acquisition of FAST bolsters Microsoft's positioning in the enterprise search market, making it that much more formidable in its enterprise search business against Google. Lets look at this –Microsoft can now span across the stack –covering the entire back-end infrastructure inside the enterprise and with collaboration tools and search – on paper, it shows formidable strength for someone trying to compete with it.

As Mary J Foley points out, Microsoft’s enterprise-search strategy is focused on SharePoint Server, a family of back-end servers and services which includes content-management and search. Microsoft also offers a Microsoft-hosted version of SharePoint, known as Office SharePoint Online, which is currently targeted at companies with more than 5,000 seats. After all Microsoft viewed Sharepoint as thenext big operating system from Microsoft. – sharepoint is aggressively muscling inside enterprises.

Seen at another level, this is part of consolidation streak and clearly almost all companies aged upwards of six-seven years in the <200 Mn$ sales are surefire hurts/beneficiaries in the consolidation fever and almost all software enterprises less than 500 Mn$ would be evaluating options, except for very niche players and those seeing growth. We can now expect some action from other big players here – to storm into a fast growing enterprise search space. This wave of consolidation is not necessarily a great development from a customer perspective - in terms of pricing and support. I also believe that this would unleash a lot more entrepreneurism in the market - people and money are floating out now. Players upwards of 1 Bn$ sales would be looking at this from a different perspective of identifying the potential catch - I guess the name of the game is changing.

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