Microsoft announced plans buy Yammer, a social network service for businesses. Yammer’s web-based service allows companies to create private social networks where employees can privately chat, shares files, and collaborate on projects. The purchase is intended to strengthen Microsoft’s enterprise software business and allow the company to compete directly with Salesforce.com. Microsoft will pay $1.2 billion in cash for the deal.
Yammer allows Microsoft to have a proven social networking product to add its applications and communication tools to. Yammer offers both free and subscription services. Steven A. Ballmer, Microsoft’s chief executive, said, “The acquisition of Yammer underscores our commitment to deliver technology that businesses need and people love. Yammer adds a best-in-class enterprise social networking service to Microsoft’s growing portfolio of complementary cloud services.”
Microsoft has not seen great success with its social networking applications for businesses, though Microsoft’s suite of software is used in the majority of homes and offices. Current offerings include SharePoint, a collaboration platform primarily used to share and manage documents. Rob Koplowitz, a Forrester Research analyst, said, ‘Microsoft has been a bit slow to social game. Social enterprise is taking off, and Microsoft needs a strong position.”
Under the terms of the deal, Yammer will continue to be led by David Sacks, its current chief executive. Mr. Sacks co-founded Yammer in 2008 out of Geni, a genealogy and social networking site. The company’s investors and board members include former executives of Facebook and PayPal.
The service has grown at a rapid rate over the last four years. Yammer has more than five million users and is used by over 85% of Fortune 500 companies. Yammer has raised a total of $142 million in venture capital, recently increasing the total by $85 million from a financing round led by Draper Fisher Jurvetson in late February.
Mr. Sacks said in a statement, “When we started Yammer four years ago, we set out to do something big. 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.” Yammer will be added to Microsoft’s office division.