Microsoft discloses $60bn takeover plan for rival SAP

Microsoft revealed yesterday that it had planned to acquire SAP, one of its biggest technology rivals, in a deal that would have given it dominance in the specialist business software market, an area where it has been struggling to make significant progress.

Microsoft revealed yesterday that it had planned to acquire SAP, one of its biggest technology rivals, in a deal that would have given it dominance in the specialist business software market, an area where it has been struggling to make significant progress.

Talks between the two, initiated by Microsoft, began late last year and ended in spring, said a statement issued by Microsoft yesterday. A spokeswoman for SAP said Microsoft had "ended the talks in March or April". News of the talks emerged as part of the pre-trial discovery process in the case brought by the US Justice Department against Oracle's $7.7bn (£4.2bn) acquisition of PeopleSoft. The Microsoft-SAP talks are expected to be used by Oracle as justification for its purchase of PeopleSoft to keep pace in the fast-consolidating business software market.

Although Microsoft's plans for SAP would have been unlikely to pass muster with competition regulators, they reveal for the first time Microsoft's willingness to contemplate large acquisitions as a way of growing its business after decades of rapid organic growth.

Microsoft, founded by Bill Gates, is sitting on a $56.4bn cash pile and is under pressure to use the cash to buy rivals or hand it back to shareholders.

Analysts have been pondering how Microsoft will carry on generating the kind of growth it has enjoyed since its formation in 1975. Its dominant position in the market for personal computer operating systems has meant it is facing greater regulatory challenges as well as increased commercial competition. The software used by companies to run their businesses is seen as a growth area. A takeover bid for SAP would have involved Microsoft paying more than $60bn for the German-based company which yesterday had a market value of $52bn. This compares to Microsoft's value of $283bn.

SAP's New York Stock Exchange-traded stock price was up 2.22 per cent yesterday in the aftermath of the revelations. Henning Kagermann, the chief executive of SAP, said: "SAP routinely evaluates potential opportunities to strengthen its leading position in the enterprise software market, and the disclosure made today should be interpreted this way." Last month, Mr Kagermann and Mr Gates unveiled a move to increase interoperability between SAP's web-based software solutions and Microsoft Office.