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Microsoft's Mass. footprint grows

Software giant is buying Fast Search of Norway - which has 200 employees in Needham - for $1.23 billion as it races to catch up with Google in the computer-search field

Email|Print| Text size + By Robert Weisman
Globe Staff / January 9, 2008

Software giant Microsoft Corp., chasing rival Google Inc. in the field of computer search, yesterday agreed to pay $1.23 billion to buy Fast Search & Transfer ASA, a Norwegian company specializing in helping businesses organize and access their internal data.

The move will expand Microsoft's footprint in the Boston area, where the US operations for Fast are based. Fast has about 200 sales, marketing, and service employees in Needham.

It will also accelerate a three-way race between Microsoft, IBM Corp., and Google to build up their presence in Massachusetts, one of the nation's technology centers.

IBM, which has acquired nine software companies in the state, has nearly 5,000 employees here and agreed in November to buy Cognos Inc., a Canadian company with 390 employees in Massachusetts.

Google last spring opened an office in Kendall Square, in Cambridge, that employs more than 150.

And Microsoft already has more than 580 employees in the state.

Fast, which started as a consumer Internet company, sold its Web-search business earlier in the decade to a company that was later purchased by Yahoo Inc. Fast has refocused in recent years on the lucrative enterprise search market, selling products that enable companies and other organizations to mine, store, and organize proliferating volumes of data. But it retains technology that could also boost Microsoft's position in Internet search, where its home-grown search engine has continued to lose market share to Google.

"Microsoft is trying to work the edges of the problem," said search engine consultant Eric Enge, president of Stone Temple Consulting in Southborough. "Right now, a full head-on assault on Google in Web search is a frustrating exercise. Fast is a decent business in enterprise search. That gives Microsoft another place to compete."

In a conference call yesterday, Jeff Raikes, president of the Microsoft Business Division, and Fast chief executive John Lervik said Fast directors had unanimously recommended that shareholders approve Microsoft's offer, which represents a more than 42 percent premium over Fast's closing share price on Friday. They said Fast's two largest institutional stockowners also support the buyout, which is expected to be completed in the second quarter.

Raikes said Microsoft sees an opportunity in the growing frustration of businesses that, in an era when the volume of data is expanding at an exponential rate, can't quickly or easily access everything, from financial databases to customer reports. "I find it fascinating that today you can find football scores on the Internet in five seconds, but it takes five hours for someone to find last year's business plan," Raikes said.

Fast shares jumped 41 percent on the Oslo Stock Exchange after the deal was disclosed. Shares of Microsoft slid 3.35 percent, a loss of $1.16, to $33.45 on the Nasdaq.

Microsoft said Fast would operate as a wholly owned subsidiary and be integrated with its Microsoft Office SharePoint Server, which offers customized collaboration software. Fast's own customers include e-commerce firms like Japan's Rakuten Inc. and media companies like Boston.com, the website of The Boston Globe.

Matthew Glotzbach, product management director for Google Enterprise in Mountain View, Calif., said Microsoft was playing catch-up to Google in the business market, where Google has more than 10,000 customers for its Google Search Appliance server. "Microsoft is recognizing the importance of enterprise search, which candidly is something Google has recognized for a long time," he said.

But picking up Fast could put Microsoft in a better position to challenge Google in areas beyond the business market, said Susan Aldrich, senior vice president at Patricia Seybold Group, a technology consulting firm in Boston. "They're getting some brains that understand Internet search," Aldrich said. "They're getting some advanced technology. And they're getting a company that's begun putting a lot of resources into the media and advertising business."

Microsoft plans to retain the 750 employees of Fast, as well as its headquarters in Oslo and its operation in Needham, said Kirk Koenigsbauer, a Microsoft general manager for the SharePoint business group, who flew to Boston from Microsoft headquarters in Redmond, Wash., for yesterday's announcement. During a presentation at the local Fast office, outlining the alliance's benefits, Koenigsbauer projected a slide with a New England Patriots logo.

"Pandering to the crowd really works," said Zia Zaman, executive vice president for global marketing at Fast.

Robert Weisman can be reached at weisman@globe.com.

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