Microsoft buys Visio for $1.3 billion

In one of its largest deals, MS spends $1.3 billion to acquire drawing and diagramming products.

Updated at 11:02 AM PT

Microsoft Corp. is beefing up its office productivity business, Wednesday announcing it would acquire Visio Corp. in a stock swap worth $1.3 billion.

Visio (Nasdaq: VSIO) makes technical drawing and business diagramming software. The Seattle-based company will become the Visio Division of Microsoft's business productivity group. Visio CEO Jeremy Jaech will become a Microsoft vice president and will report to Bob Muglia, a Microsoft senior vice president Microsoft's (Nasdaq:MSFT) who runs its productivity group.

The deal calls for Microsoft to exchange 0.45 shares of its stock for each share of Visio stock, giving it a value of around $1.3 billion. The deal must be approved by regulators and Visio shareholders. But Microsoft said it did not expect regulatory issues, since the two companies do not have overlapping products.

Pays for itself
The deal for Visio, which had $28 million in profits on $166 million in sales in fiscal 1998, will add immediately to the software giant's earnings, Microsoft Chief Financial Officer Greg Maffei said in a conference call.

"It's the first deal I can remember that will pay its own way," he said.

And while the deal is not a sexy Internet-centric one, it will contribute nicely to Microsoft's core business, he said.

"We are unbelievably active and focused on what we see as a connected world. And that's absolutely been the focus of investments over the last couple of years," he said. "That said, if you look at the (profit and loss statement) for Office and Windows, these are tremendous businesses and ones that will connect well with that world. We have an opportunity with Visio to extend them and grow them."

Visio's Jaech said the planned acquisition would help expand sales of Visio's technical drawing software overseas, particularly in the Far East.

Microsoft said there would be no immediate changes in Visio's operating procedures, and added that the company would continue working on its Visio 2000 editions.

Since virtually all of Visio's users are also Microsoft Office users, the officials said it should be easy for Microsoft's sales team to add Visio products to their lineup.

Maffei said that a goal of having half of Office users become Visio users "would be a worthy target for us, and one we don't think is unachievable."

Adding Visio's graphical capabilities to the Microsoft product offerings fills in some holes, Muglia said.

"Knowledge workers are constantly challenged with visually communicating an idea," he said. "We've had many situations where we see Visio and Microsoft together in our large customer accounts. The idea of being able to communicate visually, in addition to words and numbers, is very, very attractive."