The purchase of Yammer is part of the software giant's push to
expand its products for businesses.
Microsoft has announced that it will buy Yammer, a social networking service for businesses, for $1.2 billion in cash as it seeks to strengthen its business software offerings and compete more directly with Salesforce.com.
Under the terms of the deal, Yammer will be added to Microsoft's Office division and will continue to be led by David Sacks, its chief executive.
Yammer, which calls itself "the enterprise social network," is a sort of Facebook for business. Its Web-based service allows companies to create private social networks, on which employees can chat privately, share files and collaborate on projects.
"The acquisition of Yammer underscores our commitment to deliver technology that businesses need and people love," Steven A. Ballmer, Microsoft's chief executive, said in a statement Monday. "Yammer adds a best-in-class enterprise social networking service to Microsoft's growing portfolio of complementary cloud services."
Though the Microsoft Office suite of software has become ubiquitous in homes and offices, the company has fallen behind on social networking applications for businesses. The company offers SharePoint, a collaboration platform, but the service is primarily used to share and manage documents. With Yammer, Microsoft will be able to pin its applications to a social graph flush with communication tools.
"Microsoft has been a bit slow to the social game," said Rob Koplowitz, an analyst at Forrester Research. "Social enterprise is taking off, and Microsoft needs a strong position."
Yammer was co-founded in 2008 by Mr. Sacks, a former PayPal executive who spun the business out of Geni, a genealogy and social networking site.
Over the past four years, the service has grown rapidly as more companies have turned to the Web for secure methods of interoffice communication and collaboration. Yammer, which offers both free and subscription services, has more than five million users and is used by more than 85 percent of Fortune 500 companies.
It has raised a total of $142 million in venture capital, recently adding $85 million in late February, in a financing round led by Draper Fisher Jurvetson. The company's roster of investors and board members is stacked with former Facebook executives and members of the so-called PayPal mafia. Founders Fund, the venture firm led by a PayPal co-founder, Peter Thiel, and the Social Capital Partnership, a firm partially backed by Facebook, are both major backers. Sean Parker, the former president of Facebook and an executive general partner at Founders Fund, is a board member.
In recent months, Yammer has aligned itself more closely with the software giant. In April, Yammer acquired OneDrum, a British start- up focused on file sharing and collaboration software for businesses, for an undisclosed sum. At the time of the acquisition, Mr. Sacks highlighted the value of the start-up's applications for Microsoft products, citing the popularity of Microsoft Office documents.
"When we started Yammer four years ago, we set out to do something big," Mr. Sacks said in a statement. "We had a vision for how social networking could change the way we work. Joining Microsoft will accelerate that vision and give us access to the technologies, expertise and resources we'll need to scale and innovate."
Microsoft's pursuit of Yammer comes as the business software market converges with the consumer Web. Traditionally, a company's technology purchasing decisions were made top-down, controlled by a handful of information technology experts. That model is rapidly eroding with the rise of Web-based services that are created to be lightweight and user-friendly. Start-ups like Yammer reel in consumers with free versions. Those consumers then become evangelists at their companies, encouraging their employers to adopt the application and pay for a premium subscription.
The Yammer acquisition will allow Microsoft to compete more directly with Salesforce, which offers a similar messaging product called Chatter. Salesforce has also been aggressive in adding social- related applications to its portfolio, recently spending $689 million for Buddy Media, a social marketing business that works with companies like Ford Motor and L'Oreal. The service helps companies build and manage their advertising campaigns across social networking sites, like Twitter and Facebook.
Facebook's chief operating officer, Sheryl K. Sandberg, has joined the social network's board, becoming the first woman to serve as a director for the company, Michael J. de la Merced reported from New York.
"Her understanding of our mission and long-term opportunity, and her experience both at Facebook and on public company boards, makes her a natural fit for our board," Mark Zuckerberg, Facebook's chief executive, said Monday in a statement. Ms. Sandberg already serves on the board of the Walt Disney Co.
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