Sage hit as Microsoft buys rival

MICROSOFT threw down the gauntlet to accountancy software group Sage in Europe today by agreeing to buy Denmark's Navision for £907m. The purchase is Microsoft's second incursion on to Sage's turf in recent years after the Seattle giant spent $1.1bn (£775m) buying Great Plains Software in the US in 2000. Microsoft wants to combine Navision's business products with Great Plains Business Solutions.

Microsoft will move its European development and business solutions operation headquarters to Denmark, making it its largest product development centre outside America. Navision today reported a third-quarter net profit of 25m kroner (£2.1m) on sales of 380m kroner.

Sage has so far successfully repulsed the threat from Microsoft by concentrating on its core small business clients. However Sage shares slid 8p to 182p, as the market removed it as a possible Microsoft bid target.

Analysts said the Navision deal could also reduce Sage's long-term growth prospects in Europe where it makes about a quarter of its sales.

Sage also officially denied reports that it was preparing to respond to the Microsoft deal with a £430m purchase of Dutch consultancy Exact Holding.