The software giant will acquire Vicinity, a provider of online maps and directions, in a cash-for-stock transaction worth $96 million.
Under the terms of the deal, Vicinity's products will become part of Microsoft's MapPoint business unit, which itself offers online directions through the MSN site. In addition, MapPoint makes application development tools allowing businesses to offer online maps and directions to physical stores and offices via PCs, personal digital assistants and cell phones.
The companies expect to complete the transaction by April 2003. Microsoft will offer jobs to some of Vicinity's 117 employees, but will eliminate an undisclosed number of positions because of overlap, according to a Microsoft representative. Vicinity shareholders will receive $3.33 in cash in exchange for each share of the company's common stock. Vicinity's shares closed at $2.24 Tuesday.
Microsoft said it plans to phase out Mapblast.com, Vicinity's online directions site, because it competes with MSN MapPoint.While Vicinity's driving directions applications are similar to those already offered by Microsoft, most of the company's products complement rather than compete with MapPoint, said Vicinity executive Teri Dahlbeck.
For example, Vicinity's software includes data analysis tools for marketers that Microsoft MapPoint lacks. These include a store attribution search tool that gives businesses the ability to let consumers search for stores with specific features or services--so they can search for restaurants with a baby-changing table or hotels with a pool. Companies using Vicinity technology can then capture such requests and analyze the data for marketing and merchandizing purposes.
Microsoft may eventually incorporate the Vicinity applications into its forthcoming customer relationship management (CRM) software, said Microsoft product manager Andrew Mackles. Microsoft plans to release the first version of MSCRM, a set of applications designed to help businesses keep track of sales, marketing and service activities, by the end of the year.
"A lot is emerging in the CRM market that is taking location-based service to the next level," Mackles said.
Vicinity clients include DHL, Taco Bell, Kentucky Fried Chicken, Pizza Hut, Home Depot, The Gap, Starwood hotels and Best Western hotels.
Neither Vicinity nor Microsoft's store locator applications are designed to keep track of the location or movements of consumers, said Dahlbeck and Mackles. Vicinity applications don't gather customer identification information or create customer profiles based on geographic information, said Dahlbeck.
Location-based technologies recently introduced by cell phone service companies have created anxieties among some privacy advocates. Such services let consumers locate their friends' cell phones or let businesses track the location of their workers using satellites and cellular antennas.
Microsoft demonstrated such an application in September that it jointly developed with AT&T Wireless. Microsoft formed an alliance with the wireless carrier in July aimed at getting Microsoft software onto new mobile devices, simplifying access to corporate information over wireless devices and enabling location-based services.
Microsoft will continue to sell Vicinity as a packaged application as well as a hosted service as Vicinity has done. In April, Microsoft introduced a hosted version of MapPoint as part of its .Net Web services push.