Ok, Now It's Done. Microsoft To Acquire Powerset

Microsoft will announce today that they have acquired San Francisco based semantic search engine Powerset. The acquisition price is not being disclosed, but our understanding from sources close to the deal is that the previously rumored $100 million is “roughly accurate.”

In May we reported that Powerset was in acquisition discussions with Microsoft and was hoping to bring another bidder to the table. Google was the likely candidate, but they have publicly dismissed the notion of contextual search as a revolutionary step forward. Microsoft, which is clearly interested in improving its search market share, turned out to be the best fit.

Rumors resurfaced last week about the imminent deal.

Powerset recently launched a showcase for its semantic search product, although they lacked the funds to do a full web index to prove out the product. As part of Microsoft, they won’t have that problem any longer. Now they just have to fight the bureaucracy to make sure the project continues to move forward.

The company had raised $12.5 million in venture financing, plus another $8 million or so in convertible debt as bridge financing. That means investors will get a decent return (but not a home run), and the founders and employees will also take some real money off the table.

We first covered Powerset in October 2006, and they were a TechCrunch40 company.

Update: Microsoft announcement is here, Powerset is here.