|
Microsoft to acquire Visio
|
 |
September 15, 1999: 2:07 p.m. ET
Software firm to buy business graphics specialist in $1.3B stock swap
|
NEW YORK (CNNfn) - Microsoft Corp. agreed Wednesday to purchase business graphics software developer Visio Corp. in a stock transaction valued at $1.3 billion.
The deal boosts Microsoft's efforts to provide a wide range of productivity solutions to both small and large businesses.
Visio (VSIO) shareholders will receive 0.45 of a share of Microsoft (MSFT) stock for each of their shares. The Seattle company, which makes diagramming and technical drawing software for businesses, will run as a separate division within Microsoft's business productivity group after the merger.
The companies expect the deal to close by the end of the year.
The Visio Division will be headed by Jeremy Jaech, Visio's co-founder, president and chief executive. Jaech, who will also become a Microsoft vice president, said the deal "allows us to reach more customers than we ever could have reached before."
"We've seen a change in the way customers are choosing to buy software," Jaech said in a conference call. "There's much more corporate volume licensing now than [individual retail] sales. We can't [adapt to that change] nearly as quickly or as broadly as we could by teaming with Microsoft."
Microsoft shares fell 1-9/16 to 93-1/2 in afternoon trading, while Visio shares soared 6-13/16 to 40-5/16.
Brian Goodstadt, an analyst at S&P Equity Group, said Visio's product offerings should fit in well with others in Microsoft's business productivity group, such as Microsoft's PowerPoint software for business presentations.
Visio has long included strong integration with Microsoft software within its products. Users can, for example, implement the highly detailed charts and diagrams created in Visio's software into a PowerPoint presentation or Microsoft Word document.
Nonetheless, Microsoft has no plans to include Visio products in its Microsoft Office suite of software.
Antitrust attention
The transaction requires approval of Visio shareholders and is subject to regulatory review. In 1995, the Justice Department blocked Microsoft's attempt to acquire rival personal-finance software firm Intuit Inc. (INTU).
In that case, Microsoft had attempted to acquire the only company that held a market-share advantage in the personal-finance software market. Conversely, Microsoft doesn't produce a comparable offering to Visio software.
Nonetheless, Goodstadt said the proposed acquisition is certain to attract a certain amount of attention from the Justice Department.
"That's probably one reason they're not going to include [Visio software] in Microsoft Office," he said. "I think there will be some attention from the Justice Department, but Visio is a relatively small company compared with someone like Autodesk (ADSK), which dominates the computer-aided design market."
Bob Muglia, Microsoft's senior vice president who heads the business productivity group, said Microsoft expects the deal to make its way through the regulatory process with little trouble. "There's no overlap between Visio and Microsoft products," he said.
Justice Department officials were not available for comment.
Microsoft and the Justice Department, of course, have been locked in a lengthy antitrust battle. Closing arguments for the trial are set to begin next Tuesday in Washington.
Deal to add to earnings
Visio disappointed analysts with its results for the third quarter, when it posted net income of $9.6 million, or 31 cents a diluted share. Although that was up 14 percent from a year earlier, analysts had been expecting a profit of 35 cents a share.
When the company warned investors about the prospects for the third quarter after the market closed on July 8, its shares lost almost a quarter of their value in the following day of trading, closing at 29 9/16.
Nonetheless, Greg Maffei, Microsoft chief financial officer, said the company expects Visio to add "incremental revenue and profits" to its financial results, though he cautioned analysts against raising their earnings estimates.
|
|
|
|
|
 |
|
