January 2001

Microsoft Acquires Great Plains

In a move that both companies deemed a joining of “visions,” Microsoft Corp. acquired accounting vendor and e-business solutions provider Great Plains Software Inc. last December for the price of $1.1 billion in Microsoft stock.

This collective vision focuses on the future of business practices for small and mid-size companies and their desire to facilitate the seamless interconnection of online and on-premise business processes like financial systems, customer management, supply chain management, inventory management, and e-selling. Crucial to the cost-effective implementation of this interconnectivity is the seamless interconnection of business application software, which can be run on site or accessed through the Internet as a service, officials from both companies said.

With this objective in mind, the acquisition agreement merges Microsoft’s vast technical resources, global reach, and .NET technology platform with Great Plains’ expertise in business process applications for the mid-market, said Jeff Raikes, vice president of Microsoft’s Productivity and Business Services Group, during a Dec. 21 conference call. Microsoft’s .NET is designed to facilitate the interactive collaboration of computers, devices, and services to offer more valuable solutions to customers.

“This acquisition will help make our integrated business management solutions and the benefits of Microsoft’s .NET vision of simple, integrated technology that works anytime, anywhere, on any device truly accessible to these customers [small and mid-market companies],” Great Plains CEO Doug Burgum said, in a Microsoft press release. “Microsoft and Great Plains will continue to broaden and strengthen the Great Plains product lines with an expanded focus on helping customers succeed in the interconnected economy.”

Based on information provided during the conference call, the acquisition will not interfere with Great Plains’ team structure and management: The Fargo, N.D.-based company will become a division within the Productivity and Business Services Group.

While Great Plains’ worldwide channel partners, not all of which are Microsoft-certified, will be expected to possess skill sets that are relevant to the evolving economy, they will continue to function as the primary distribution method for the company, Burgum said. Similarly, the acquisition will not affect Microsoft’s bCentral, which provides software capabilities to small companies of one to 25 employees, but will complement and benefit from the strengths of Great Plains, which typically serves larger companies, Raikes said.

When asked whether the Great Plains’ purchase represented a strategic attempt by Microsoft to jump into the business application market, Raikes said the established role of infrastructure provider would remain the software behemoth’s main concern, but he did not deny the possibility of expansion altogether.

“It would be very fair and correct to say that we have nothing else planned at this time,” Raikes said. “But it would also be fair and correct to say that we believe that Doug Burgum will continue to follow the market closely, and we will see what opportunities may be out there.”

Despite Microsoft’s pending antitrust litigation, the deal, which exchanges 1.1 shares of Microsoft common stock for every 1 share of Great Plains common stock, is expected to receive regulatory approval, Raikes said.

Great Plains’ second quarter revenues increased 59 percent over the same period last fiscal year, from $47.4 million to $75.5 million, and increased 13 percent sequentially over the first quarter of fiscal year 2001. Net income and diluted earnings per share for the second fiscal quarter, excluding the effect of amortization of acquired intangibles, were $4.2 million and $0.20 per share.

Great Plains employs 2,000 people worldwide and was founded in 1981.