Microsoft to buy Vicinity for location services

Microsoft has agreed to acquire a company that makes software for providing location-based services, and will use the company’s technology to bolster its .Net software for delivering geographical information to mobile devices.

Microsoft will spend approximately $96 million in cash for Vicinity, a wireless software company based in Sunnyvale, Calif. The transaction is expected to be completed by the end of the first quarter of 2003, and is subject to regulatory review and approval by Vicinity shareholders, Microsoft said in a statement Tuesday.

The technology Microsoft will gain from the acquisition is slated to be integrated into the Microsoft business unit that develops location-based services software around MapPoint .Net. That software can be used to deliver driving directions and other geographical information to mobile devices.

AT&T Wireless Services recently announced the availability of a combination phone-PDA running Microsoft’s Pocket PC Phone Edition software, and plans to soon offer location-based services to users of those devices. For example, corporate users will be able to use the MapPoint .Net service to locate other employees and have that information displayed on the Pocket PC devices. Similarly, it will be able to display driving directions to a customer site.

The MapPoint .Net services available from AT&T Wireless rely on the carrier’s technology to pinpoint the location of handsets on its network.

Microsoft plans to combine Vicinity’s technology with some of its own and employ its engineers to develop new applications and tools for building location-based services using MapPoint .Net. They are expected to be delivered within six months to 18 months of the acquisitions closing, said Teri Dahlbeck, Vicinity’s senior vice president of marketing and business development.

Vicinity was established in 1995 and lists customers such as Bank of America, FedEx, Hewlett-Packard and The Home Depot.

The company is scheduled to report its first fiscal quarter 2003 earnings on Wednesday. One financial analyst expects Vicinity to lose $0.07 per share for the quarter on $3.8 million in revenue, according to research company First Call/Thomson Financial.  

Under terms of the deal, Vicinity shareholders will receive $3.33 in cash in exchange for each share of Vicinity common stock, Microsoft said.