Microsoft's bid for FAST bolsters enterprise search

In November, Microsoft representatives began to comment that the enterprise search market had reached "a tipping point"; on Tuesday, the company backed up that claim with a bundle of cash, offering to buy enterprise search software company Fast Search And Transfer (FAST) for 6.6 billion Norwegian kroner ($1.2 billion).

Analysts and other search firms said Tuesday the move means that enterprise search has truly arrived as a software category, and also that further consolidation will likely occur in the space, creating opportunities for niche players.

No immediate stumbling blocks appear to be in the way of Microsoft buying FAST, which is based in Oslo. The company's board has recommended that shareholders accept the offer, which represents a premium of 42 percent over FAST's share price at close of business on Friday. The companies expect the deal to close in the second quarter.

"It's a great bit of technology acquisition for Microsoft," said Mike Davis, senior analyst with Ovum Group.

Microsoft is buying FAST as a way to break into the high-end enterprise search market and also offer customers a full range of search products. In November, it introduced Search Server 2008 and Search Server Express 2008. Microsoft is pitching Search Server 2008 as a cheap entry into enterprise search, while the Express version is free for single installations.

FAST's rivals include Autonomy -- which recently acquired Meridio and Zantaz -- and Endeca.

Davis said it would not surprise him if a rival vendor, such as Oracle, follows up Microsoft's move with a high-end search acquisition of its own.

He and another analyst suggested Tuesday that Microsoft has not only scooped up a solid company but got a bargain in the process.

Guy Creese, an analyst with Burton Group, argued on his blog that FAST's recent financial troubles, which led to layoffs last year, probably helped drive down its price tag.

"While the operational wheels fell off, the FAST technology is strong at its core," added Creese, who called the pending deal "a huge coup" for Microsoft.

But cost was not the driving factor in Microsoft's choice of FAST over other high-end search vendors in the space, according to Jeff Raikes, president of Microsoft's business division.

Raikes insisted during a conference call Tuesday afternoon that FAST simply had the best people and technology.

The executive didn't shed much light on the negotiation process that led up to Tuesday's announcement, but did indicate one aspect of Redmond's immediate plans, assuming the deal closes as expected.

"I can simply say that part of what we will look at ... will be to marry the strengths we have with our software-plus-services model with what FAST is doing."

Raikes said FAST's technological strengths, such as its scalability and domain-specific searching capabilities, proved attractive to Microsoft.