The Norwegian software developer, founded in 1997, develops technologies used by business customers to search their databases, although Fast Search has lately branched out into the field of online advertising.

Microsoft has been beefing up its search and online advertising capabilities to better compete with Google and Yahoo, although the Fast Search deal is unlikely to help the company in the consumer online market, analyst Brent Williams of The Benchmark Company told clients. He viewed the move as a "tuck-in deal rather than as a game-changing acquisition."

 

Shares of Fast Search, a company bathed in controversy over the past year, slumped in 2007 after sales tapered off, board members engaged in heated public disputes and the company acknowledged flaws in its accounting methods.

Yet Fast Search's technology was still considered valuable enough for Microsoft to swoop in to buy the company. Customers include Disney, UBS, Pfizer, LexisNexis and Comcast Corp., which struck a deal with Fast Search in late December.

In the most recent third quarter, Fast Search reported a net loss of $100.4 million on revenue of $35.6 million, down from $42.5 million in sales in the comparable 2006 quarter. A few months before those results were released, Fast Search unveiled a reorganization plan under which it would reduce costs, trim its payroll and refocus on higher-growth markets.

The board of Fast Search has unanimously recommended the offer and shareholders representing 37% of the stock have made a binding commitment to the deal. Those commitments include Fast's two biggest shareholders, Orkla ASA and Hermes Focus Asset Management.

Shares in Fast Search surged 39.3% to 18.60 kroner in Oslo. In U.S. trades, Microsoft stock was down 0.6% to $34.43.

John Lervik, chief executive of Fast Search, said Microsoft's sales and marketing platform will help Fast grow much more quickly.

"This acquisition gives Fast an exciting way to spread our cutting-edge search technologies and innovations to more and more organizations across the world," Lervik said in a statement.

Erik Hjulstroem, an analyst at Kaupthing Bank, agreed. He said Microsoft will be able to integrate Fast Search's search algorithms across many of its divisions, both to corporate and consumer clients.

The analyst previously had a reduce rating on Fast Search because the company on its own would struggle to build the necessary scale. "We advise investors to accept the bid, given the poor outlook the company has on a stand-alone basis," Hjulstroem said in a note to clients.

Jeff Raikes, president of Microsoft's business division, said the acquisition would enable business customers to pick just one vendor to handle all of their needs. "Until now, organizations have been forced to choose between powerful, high-end search technologies or more mainstream, infrastructure solutions," he said.

Microsoft said the deal is subject to approval from shareholders representing more than 90% of Fast's shares and added it expects the deal to be completed in the second quarter of 2008.