Microsoft Buys Fast, Plays Catch-Up

Can Microsoft close the gap with Google in the market for mainstream Web search is another matter. Microsoft's market share has been stagnant, with its sites accounting for 9.8% of U.S. Web searches in November 2008, compared with 58.6% for Google and 22.4% for Yahoo, according to COM Score.

Microsoft bid $1.2 billion for a Norwegian search software company, in what analysts said was mainly an effort to add more tools to its lucrative Office products, but was also being done with an eye toward fending off Google. Its software helps teams of workers quickly search the corporate storehouse of information for answers about procurement, marketing, manufacturing and product design. Fast is not a competitor in consumer Web search and advertising, a market dominated by Google and one where Microsoft is investing heavily and struggling to make progress.

Ever lagging in the lucrative business of Internet search and related ads, Microsoft (MSFT) is dipping into its cash reserve to buy a Norwegian company it hopes will create a new flank in its bid to chip away at Google's market dominance. Microsoft is purchasing Fast Search & Transfer for $1.23 billion, paying a 42% premium for technology to compete in the expanding market for corporate search software.

Fast sells search engines that let companies comb through the gobs of digital information they generate these days, a capability where Microsoft's current search arsenal comes up short. Using Fast's software, employees can find operational data stored in the vast array of folders and databases on their corporate servers. The technology is also used to let consumers sift through online product catalogs more quickly; retailer Best Buy (BBY) used fast’s software to improve the search engine on its Web site.

Microsoft's business software division called corporate search technology an "indispensable tool" for companies dealing with an explosion of data about their products and performance. Corporate search "will be for workers tomorrow what Internet search is for consumers today,”. Fast's software may also help Microsoft improve its Web search.

Whether the deal pays off may turn on two questions: Can Microsoft use its direct sales force and network of resellers to ramp up Fast's sales quickly enough to move the needle on Raikes' $16.4 billion-a-year division, which produces the company's flagship Office software suite? And can Fast's stable of nearly 200 engineers adapt their expertise to consumer Web search and online software, key businesses for Microsoft.

There are some significant differences between Web search and so-called enterprise search technology. In consumer searches, the popularity of a Web page, for example, is an important factor in determining its relevance, while popularity tends to be less important in ranking corporate information sources.

Google does compete in the enterprise search market with specialized software packaged in a slender server computer, called the Google Search Appliance. And Microsoft sees enterprise search as a promising new market where it wants to get a leg up on Google and other rivals. With this acquisition, we are the clear leader in enterprise search.

Microsoft plans to combine Fast's technology with its SharePoint Server software, which a company can use to let its workers share documents over the Internet. Another possible opportunity for Microsoft would be to make Fast's software more customizable, something Google's corporate search-engine server doesn't allow.

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