Microsoft Completes Merger With FOX Software

REDMOND

Microsoft Corp., as expected, has completed its $175 million merger with Fox Software, an acquisition expected to strengthen Microsoft's hand in one of its weakest areas, database software for personal computers.

One thing the acquisition will not do is change Microsoft's financial results for its fourth quarter, which ends today. "The merger is considered a pooling of interests and is not expected to have a material financial effect on Microsoft's June quarter results," the company said.

However, Bill Whitlow, an analyst with Pacific Crest Securities, said the "pooling-of-interests" treatment on the acquisition means Microsoft will be forced to restate its quarterly financial results "as if Fox had been purchased at the beginning of 1991. Fox is so small compared to Microsoft, I'm surprised they'd do it that way," Whitlow said.

Microsoft Treasurer Mike Brown, through a spokesman, said, "This was the simplest way of doing the transaction. And it was also a tax-deferred transaction for the sellers."

Under the merger agreement, which closed yesterday and was made before Microsoft split its stock three-for-two, Microsoft exchanged 1.3 million of its shares for Fox. At the time of the transaction, Microsoft's stock was trading at $127 a share.

Also yesterday, Microsoft said it plans to offer software upgrades to Fox's customers.

Tod Nielsen, Microsoft group product manager for Fox products, called Fox's installed customer base "one of the most important assets" of the company. "We plan to protect our existing customers' investments through low-cost upgrade offers, make the products widely and easily available to other users with attractive, competitive pricing, and provide quality service and support," he said.