Microsoft rumoured to be seeking Sage


10 Jul 2003

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Microsoft has been linked with a possible swoop for the UK business-software vendor Sage, according to press reports. Shares in Sage rose to 179.95p sterling on Tuesday on foot of a rumoured bid and were higher still yesterday at 185.50p sterling.

Microsoft has traditionally been a very cash-rich company and has recently been considering massive dividend payouts to shareholders. It may also leave some spare change for an acquisition, reports suggested. When contacted by siliconrepublic.com, spokespeople for Microsoft and Sage would not comment on the speculation.

A possible purchase of Sage would be a strategic fit with previous deals in this space however; Microsoft has already acquired two business software suppliers, the Danish firm Navision and Great Plains of the US. Both operate primarily in the mid-market whereas Sage is predominantly used in small businesses.

It would be ironic if Sage were to be bought, as the company has risen to its position in the market thanks to a strong acquisition-based strategy of its own. Sage has more than three million customers throughout the world and more than 900,000 of these have annual support contracts. The company employs over 5,500 people – including a substantial operation in Ireland with a staff of 160.

Any such deal would also bolster Microsoft’s position at the small and medium enterprise (SME) market for business application software. This sector has become especially competitive in recent times; earlier this year SAP released a business software offering for SME customers. At the high end of the market, Oracle has been pursuing PeopleSoft for the past number of weeks, and analysts have indicated that such a move would help to ward off the advances of other competitors – including Microsoft.

All of these developments have left industry observers anticipating consolidation in this space. According to reports however, Microsoft’s possible purchase of Sage would be subject to regulatory approval in the US and Europe.

By Gordon Smith