P2640-R: Microsoft - Board Of Directors - Review Materials: Project Constellation

This document is available in two formats: this web page (for browsing content), PDF (comparable to original document formatting). To view the PDF you will need Acrobat Reader, which may be downloaded from the Adobe site. For an official signed copy, please contact the Antitrust Documents Group.

GOVERNMENT EXHIBIT P2640-R


CONFIDENTIAL

Board of Directors - Review Materials


Project Constellation
January 5, 2004

Microsoft Confidential MS-OPSUB 000678 HIGHLY CONFIDENTIAL

Who is Sagittarius ?

  • For more detail see Appendix Page
    Page 21
    Page 19
    Page 3
    Page 23
    Sagittarius is the world's largest enterprise application vendor. It sells software products in three primary categories: enterprise resource management ("ERP"), customer relationship management ("CRM") and supply chain management ("SCM"). The Company's software helps enterprises more efficiently manage their financial and operational processes and resources, both internally and with suppliers and customers
  • Approximately 65% of the Fortune 500 and most of the Global 2000 are running at least some Sagittarius applications. The company has an installed base of more than 20,000 customers, with high customer retention rates (90%+)
  • Of the top enterprise applications vendors (Ophiuchus, Sirius, Pegasus), Sagittarius has approx 57% of the total license revenue in that peer group
  • Total 12 month trailing revenue of approximately € 7.1 billion, split almost evenly among license revenue (31%), maintenance revenue (36%) and services revenue (33%). The company sells globally, with 55% of sales coming from Europe (23% from Germany), 33% from the Americas and 12% from Asia Pacific
  • Headquartered in Walldorf Germany, Sagittarius employs 29,374 employees worldwide. The company was founded in 1972 by five former IBM employees (including current Chairman Hasso Plattner) and went public in 1988

Microsoft Confidential MS-OPSUB 000679 HIGHLY CONFIDENTIAL

Strategic Rationale for a Combination - Better Together

  • Sagittarius and Mensa operate in large and complementary segments with minimal product overlap
  • A combination would offer great benefits to multiple stakeholders
    • Enhances our relationship with enterprise customers
    • Creates innovative new customer scenarios and products
    • Complementary businesses and breakthrough innovations create value for the entire industry
    • New revenue streams and expense synergies drive increased profit and shareholder value

Microsoft Confidential MS-OPSUB 000680 HIGHLY CONFIDENTIAL

Strategic Rationale - Enhances our Relationship with Enterprise Customers

  • Achieve leadership in ERP applications for Fortune 500 companies
    • An objective we will not pursue in the absence of this combination
  • Increase Mensa mindshare with senior non-IT business executives
  • A more complete offering for the enterprise will enhance relationships with global systems integrators

Microsoft Confidential MS-OPSUB 000681 HIGHLY CONFIDENTIAL

Strategic Rationale - Innovative New Customer Scenarios and Products

  • Development of innovative new products that break barriers between end users users and backend enterprise data
  • Improved CRM user experience with Office
  • Major simplification and cost savings in configuring line of business applications
  • Improved experience for ecommerce between Mensa's Small and Medium Business ("SMB") and Sagittarius'enter prise customers
  • Ability to create seamless enterprise application roadmap for growing customers

Microsoft Confidential MS-OPSUB 000682 HIGHLY CONFIDENTIAL

Strategic Rationale -- Creates Value for Entire Industry

  • New wave of innovation in business process customization unleashed
  • Simplified ability for partners to customize enterprise workflow processes across applications
  • Best of SMB offering and strengthened SMB channel attracts and benefits independent software vendors and partners
  • Global phenomenon with global benefits

REDACTED

Microsoft Confidential MS-OPSUB 000683 HIGHLY CONFIDENTIAL

Strategic Rationale - New Revenue Streams and Expense Synergies

  • Innovation brings new revenue opportunities
    • Portal / Business Intelligence - new license revenue stream via utilization of Mensa Office applications for back-end data presentation and analysis
    • New opportunities in customer relationship management segments
    • More integrated and complete solutions with deeper functionality drives
      increased monetization in small and medium business segments
    • Opportunity to better promote existing Mensa products (SQL, Windows
      Server) in Sagittarius customer deployments
  • Cost efficiencies
    • More efficient use of R&D and Sales & Marketing resources via unification and consolidation of overlapping resources and functions
    • Elimination of unnecessary and duplicative corporate overhead

Microsoft Confidential MS-OPSUB 000684 HIGHLY CONFIDENTIAL

High Level Combination Assumptions

REDACTED

  • Sagittarius brand persists and division maintains independent enterpriseselling effort

REDACTED

  • Maintenance of strong R&D and Sales & Marketing presence in Germany;

REDACTED

  • Support and services remain for the most part separate

REDACTED

Microsoft Confidential MS-OPSUB 000685 HIGHLY CONFIDENTIAL

Preliminary Combination P&L - Prior to Transaction Expenses /Charges
($ in billions)

REDACTED

Microsoft Confidential MS-OPSUB 000686 HIGHLY CONFIDENTIAL

Revenue Synergies Summary -- Base Case

Portal / Business
Intelligence (BI)
Customer Relationship
Management (CRM)
Small and Medium Business
SQL Server
Windows Server


REDACTED

Microsoft Confidential MS-OPSUB 000687 HIGHLY CONFIDENTIAL

Cost Synergies Summary -- Base Case

Research & Developement
Sales & Marketing
General & Administrative


REDACTED

Microsoft Confidential MS-OPSUB 000688 HIGHLY CONFIDENTIAL

Preliminary Synergies Analysis - Case Comparison ($mm)

REDACTED

Microsoft Confidential MS-OPSUB 000689 HIGHLY CONFIDENTIAL

Preliminary Synergies Analysis - Case Comparison ($mm)

REDACTED

Microsoft Confidential MS-OPSUB 000690 HIGHLY CONFIDENTIAL

Framing of Price:

REDACTED

Microsoft Confidential MS-OPSUB 000691 HIGHLY CONFIDENTIAL

Preliminary Contribution Analysis

REDACTED

Microsoft Confidential MS-OPSUB 000692 HIGHLY CONFIDENTIAL

Exchange Ratio Background

REDACTED

Microsoft Confidential MS-OPSUB 000693 HIGHLY CONFIDENTIAL

Enterprise Value -> Exchange Ratio

REDACTED

Microsoft Confidential MS-OPSUB 000694 HIGHLY CONFIDENTIAL

Implied Premium

REDACTED

Microsoft Confidential MS-OPSUB 000695 HIGHLY CONFIDENTIAL

Combination P&L - Preliminary Accretion/ Dilution Analysis
($ in billions)

REDACTED

Microsoft Confidential MS-OPSUB 000696 HIGHLY CONFIDENTIAL

In 5 Years are We Happy or Sad?

  • Calculation of Sagittarius and Synergies as a percentage of total FY08 operating income under different Mensa and Sagittarius growth assumptions
  • Shaded portions represents contributions in excess of

REDACTED

Microsoft Confidential MS-OPSUB 000697 HIGHLY CONFIDENTIAL

Issues and Risks

  • Risk of losing significant portion of current Sagittarius Unix/Linux platform based business, despite efforts to retain
  • Lengthy transaction process -- 6-12 months to close
  • PR likely to be distracting to both core business and management after announcement (pre-close)
  • Integration risks are considerable; Mensa has historically had difficulty in managing remote R&D

REDACTED

  • Management bandwidth

Microsoft Confidential MS-OPSUB 000698 HIGHLY CONFIDENTIAL

Updated August 14, 2015

Was this page helpful?

Was this page helpful?
Yes No