Leader: Microsoft's play for SAP

The Great Leap that just couldn't remain a Great Secret

The Great Leap that just couldn't remain a Great Secret

A can of worms has been opened. Late in the afternoon, GMT - crucially first thing in the working day in California - Microsoft and SAP disclosed that late last year they entered merger talks.

Specifically, and according to an unusual statement from Microsoft, the US software giant "initiated preliminary discussions with SAP AG to explore the possibility of a potential merger between the two companies".

SAP's CEO, Henning Kagermann, has also tried to sound blasé about the almost-deal. He tried to keep the story low key by stating: "SAP, like all publicly held corporations, routinely evaluates potential opportunities to strengthen its leading position in the enterprise software market, and the disclosure made today should be interpreted this way."

Make no mistake - this wasn't two bosses chatting idly.

For some time, the Department of Justice in the US - closely watched by a similarly scrutinising EC in Europe - has alleged that Oracle, a rival of both Microsoft and SAP, isn't right to buy another enterprise software company, PeopleSoft, because it will mean declining competition in that market.

Oracle, for its part, has hinted that the issue wasn't that it would dominate but that it would form a long-term bulwark against the future intentions of Microsoft - hardly itself the competition authorities' bosom buddy - in that market.

Cue the likelihood that Oracle was about to present the scoop of a potential Microsoft-SAP tie-up in the trial, which began just hours ago.

Cue Redmond's decision to spoil that little surprise with the, as we call it, unusual statement.

Microsoft and SAP remain friends. The latter considers Microsoft a key web services partner and doesn't see much competition in its high-end space - at least not yet.

Microsoft has been slowly building its credentials in areas such CRM and ERP, mainly through the relatively minor acquisitions of companies such as Navision and Great Plains.

Today's news shows that it was willing to entertain a Great Leap - willing to try to become a low- to high-end software provider through one mega-deal.

Don't expect to have heard the last on this one.