Microsoft sets Autonomy shares alight

Autonomy shares had already been the best performing UK SITS share in 2007 - up 73% in the year. Today they extended that gain adding 9.4% on the session to close at 990p. This values Autonomy at £2.15b or c$4 billion.

Although Autonomy seems to put out contract win/new OEM deal press releases almost by the hour, the real reason for today's power performance was today's earlier agreed bid by Microsoft for Norway's Fast Search & Transfer ASA (FAST) for $1.23b - a premium of 42% on the previous close. FAST is Autonomy's nearest competitor in the Enterprise Search sector. If search is 'the place to be' for the consumer (89% of all internet users use Google at least once per day) then Enterprise search is fast becoming 'the place to be' in enterprise too. It is no good companies having vast repositories of in-house data and research if staff cannot easily locate and use it. Most enterprises would consider allowing Google to go through their in house data in much the same way as they would willingly invite a burglar onto their premises. That's the reason why Google Desktop might be quite OK for Richard Holway as a person but is clearly NOT OK for Lloydstsb (just one of the many new deals Autonomy has announced in the first few days of the New Year. These have also included OEM deals with Adobe, Oracle and EMC - See Ovum EuroView for more details)

I'm not suggesting that Microsoft will buy Autonomy anymore. But there are other leading software companies who also want a piece of the Enterprise Search action. And, right now, there is really only one major candidate. But, unlike FAST which has had a chequered financial history (see FT Comment), Autonomy is what analysts like to call "fully priced". Mind you they were calling it 'fully priced' a year ago when it was half its current price!

If only I'd decided to back my friend Mike Lynch by buying Autonomy last year rather than Blinkx...