Microsoft pays $1.2bn for Fast Search

The US software giant Microsoft yesterday agreed to pay $1.2bn (608m) for the Norwegian technology company Fast Search and Transfer, a leading rival of Britain's Autonomy.

Microsoft's readiness to pay 19 kroner (1.79) a share for Fast Search, a 42 per cent premium to the company's closing share price on Friday, surprised analysts and boosted valuations of similar businesses. Autonomy shares closed almost 10 per cent up last night at 990p.

Like Autonomy, Fast Search specialises in "enterprise search" technology, selling products to businesses that enable staff to find key information and data more quickly.

The deal added to speculation about consolidation in the sector. Mohammed Mowala, an analyst at Goldman Sachs, said: "We believe this transaction should be significantly positive for Autonomy as it highlights the strategic value of this asset Autonomy is now the only remaining pure-play vendor in enterprise search space."

Fast Search's blue-chip clients include Reuters, Pearson and Dow Jones. However, some analysts believe Microsoft's acquisition of the company would diminish Fast Search's competitive threat to Autonomy, which already outsells it.

Michael Brest, an analyst at UBS, said some businesses, particularly other technology companies, would be less comfortable trading with Fast Search once it was owned by Microsoft. Mr Brest added: "Autonomy's differentiated technology and strong patent protection has [in any case] in the past allowed it to withstand such competitive attacks."

Microsoft has yet to secure control of Fast Search, but has won acceptances of its offer from 37 per cent of shareholders. The deal also has the backing of the Norwegian company's board.

Microsoft may use Fast Search's technology to improve its consumer search engine services, but it is also keen to protect its sales to business customers, which could be hit by a push by Google into the business search sector.