Microsoft issued a press release early yesterday morning saying that it had held discussions with SAP, the big German maker of business software, about buying that company. The merger talks began late last year, the terse statement explained, but Microsoft broke off the negotiations after weighing the "complexity of the potential transaction" and the management headaches of trying to put together two huge software companies.

Microsoft made the disclosure before it was presented in the trial of the antitrust case brought by the Justice Department to contest the Oracle Corporation's hostile $7.7 billion bid for PeopleSoft.

Microsoft is not a litigant in the antitrust case. But its presence looms large in the courtroom, especially its strategy in business software - a $25-billion-a-year market for the back-office programs that companies use to manage their finances, human resources, procurement, sales and customer relations.

The bid for SAP that Microsoft was pursuing would have been the largest ever in the computer industry. SAP, the world's third-largest software company, after Microsoft and Oracle, has a stock market value of more than $50 billion, and Microsoft would have had to offer a premium to buy the company.

The takeover talks show just how eager Microsoft is to find new sources of growth now that the business it has long dominated, personal computer software, is slowing.

Oracle insists that the market for business software is already highly competitive and likely to remain so even if it is allowed to buy PeopleSoft. Microsoft's disclosure could help determine the outcome of the case by bolstering Oracle's defense against the government's contention that a merger with PeopleSoft is anticompetitive.

Microsoft described the aborted merger talks with SAP as having been "preliminary" and added that neither company intended to resume the negotiations.

Microsoft wanted to make the disclosure on its own terms instead of allowing Oracle lawyers to break the news in court. Oracle learned of Microsoft's overtures to SAP in Microsoft documents Oracle's lawyers received in pretrial discovery.

Microsoft's merger talks with SAP, the largest maker of enterprise applications software, with revenue of $8.6 billion last year, strongly suggest that Microsoft's ambition is to become the leader in the corporate software market and climb to the top as quickly as possible.

Such a purchase would be far bigger than anything Microsoft has tried. Its acquisitions tend to be much smaller, ranging up to $1 billion or $2 billion.

Two of Microsoft's largest moves have come in building its business software division, which had sales of nearly $700 million last year. In December 2000, Microsoft acquired Great Plains Software for $1.1 billion and in May 2002, it purchased Navision, a Danish producer of business software, for $1.3 billion.

In 1995, Microsoft abandoned a $2.2 billion bid for Intuit, a leader in personal finance and tax preparation software, after the Justice Department objected.

"The talks with SAP show the strategic importance of this business to Microsoft," said David M. Smith, an analyst at Gartner, the technology research firm. "It's no surprise that Microsoft is looking for other acquisitions in the business software applications industry. But the fact that Microsoft was talking to SAP means they were going after the big kahuna."

Microsoft increasingly needs new markets as its mainstay desktop PC business matures. Most analysts expect its revenue to increase by less than 10 percent next year, far less than the routine 20 to 30 percent growth in the 1990's.

The Justice Department contends that the market for supplying business software to the largest corporations is an oligopoly of three - SAP, Oracle and PeopleSoft. If Oracle is allowed to buy PeopleSoft, the Justice Department and 10 states assert, the number of major rivals in business software will be reduced from three to two, thus driving up prices.