Microsoft has told partners that talks with SAP do not in any way detract from our focus and commitment to Microsoft Business Solutions [MBS] and to delivering high value software and services to small and mid-market businesses.

The statement, posted to Microsoft’s partner program web site, stands in contrast to a more tightly worded release issued on Monday by Microsoft, covering the circumstances and outcome of the SAP talks.

According to that statement: There are no intentions to resume these talks.

However, questions remain about Microsoft’s intentions in business software and Enterprise Resource Planning (ERP), and about whether the company is looking elsewhere to grow its ERP practices into bigger customers, outside the mid-market.

While Microsoft did not go into the details of the timeline of discussions with SAP, the company’s Monday statement notes discussions ended a few months ago, citing the complexity of the potential transaction and subsequent integration.

It was just a few months ago, in March, when Microsoft executives provided a sworn statement to the US Department of Justice (DoJ) saying the company had no plans to enter the enterprise market within the next two years.

Microsoft’s statement was intended to help the DoJ’s courtroom battle against Oracle Corp, attempting to prevent a hostile takeover of PeopleSoft Inc – the case opened in a San Francisco, California court this week. The DoJ contends the ERP market is dominated by Oracle, PeopleSoft and SAP, and acquisition would be bad for customers.

Oracle defense argues competition is healthy, with Microsoft expected to increase improve existing products, namely those in MBS, to compete in bigger value, enterprise deals.

It’s possible, though, the Oracle and PeopleSoft case prematurely forced Microsoft’s hand, forcing talks into the open, and leading to their termination. Microsoft is recovering from a costly brush with the DoJ over anticompetitive practices by bundling Internet Explorer with Windows.

A merger with SAP, owner of a quarter of the ERP market, could help Microsoft overnight break-out of its five percent ERP market share held by MBS, but would also risk opening a fresh investigation over Microsoft and competition.

Microsoft could be seen as attempting to extend its desktop monopoly to back-end server software by increasingly integrated SAP with Office, BizTalk Server and other products, while also locking users into a Windows-only ERP solution based on SQL Server.

Instead, Microsoft and SAP agreed deeper developer and product integration at SAP’s annual Sapphire conference in New Orleans, Louisiana. SAP this summer plans a Visual Studio.NET plug-in with support for Visual Basic.NET in its SAP.NET Connector 2.0, along with sample applications providing access to SAP systems from Office and Visual Studio 2005, and interoperability between NetWeaver and BizTalk Server, SharePoint Services and Exchange Server in 2005.

If Microsoft does indeed consider its future lies in selling business software to enterprise customers, as it clearly does – having entertained the notion of merger with SAP in the fist place – then the company is likely return to the subject of merger or acquisition, sometime outside of the next two year time commitment it gave the DoJ.

When that happens, Microsoft could potentially pick a smaller vendor who could expand MBS’s features and capabilities to suit needs of larger customers, choosing someone likely be off the DoJ’s radar, or Microsoft could return to SAP, once Oracle’s PeopleSoft bid is consigned to history, and attention over antitrust has settled.