KUHN CAPITAL Monday, March 19, 2018
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Look Out SAP, Here Comes Microsoft

Microsoft yesterday agreed to buy Denmark-based Navision -- one of the largest remaining independent small business software vendors -- for $1.3 billion.

WIth a purchase price of over 40 times Navision's fiscal 2002 earnings, Microsoft's offer is rich -- $37.10 in cash or stock per Navision share, a 36% premium over the company's share price before deal speculation began. Navision's five founders, who control 57% of the company, have accepted the offer, yielding them $751 million.

Buying Navision permits Microsoft to compete more directly with SAP and Sage in the sale of accounting software in Europe.

This deal follows last year's transaction in which Microsoft purchased small business accounting software firm Great Plains for $1.1 billion. With that deal, Microsoft entered the US smaller business accounting software arena, territory dominated on the high end by such players as SAP.

Microsoft's strategy is increasingly clear. It's similar to the tack taken by Japanese auto makers in years past: start with economical offerings to the price-sensitive mass market, then migrate upstream with more sophisticated, expensive products, much as the company did with its NT product line.

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