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June 25, 2012

Microsoft buys Yammer for $1.2bn

Microsoft has confirmed that it has purchased enterprise social network Yammer, and will be integrating it into Microsoft’s Office division.

By Allan Swann

The company confirmed the sale on Monday as an all cash deal valued at $1.2bn (£769m), after a long period of market speculation.

Microsoft has said it will continue to operate Yammer as a standalone service, but it will operate under the Microsoft Office division. It will complement Microsoft’s existing cloud offerings Office 365, Sharepoint, Dynamics and Skype, and will be a key driver for the Microsoft in its continued transition to the cloud.

David Sacks, Yammer CEO and Founder
Yammer CEO and founder David Sacks

The acquisition of Yammer underscores our commitment to deliver technology that businesses need and people love," said Microsoft CEO Steve Ballmer.

"Yammer adds a best-in-class enterprise social networking service to Microsoft’s growing portfolio of complementary cloud services."

Founder and CEO David Sacks will retain his role as head of Yammer, but the division will now report to Office president Kurt DelBene.

The deal bolsters Microsoft in the cloud and social. It has already feeling pressure from competition such as Salesforce.com, which recently purchased Buddy Media for $745m earlier this month, and Salesforce’s long standing social and networking tool Chatter.com.

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The Yammer purchase also gives Microsoft an upgrade against enterprise rival Oracle, which has bought Virtue and Collective Intellect, to analyze data on social networking sites.

Yammer has been no stranger to acquisitions itself, picking up file sharing and collaboration company OneDrum in April.

Yammer's desktop
Yammer’s desktop

Sacks says Microsoft’s capital injection will be key to taking the business to the next level.

"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."

The news is not all good however, Yammer rivals are already seeing clients defecting to their services, fearful of Microsoft’s influence on the company.

CEO Tony Zingale of Key rival Jive told Bloomberg that his company is actively looking to capitalise, by offering incentives for Yammer users to make the switch.

"Clearly if the momentum in these kinds of calls pick up, we’ll structure something formally and offer it publicly to Yammer customers," Zingale said.

"Not everybody is a huge Microsoft fan."

Launched in 2008, Yammer provides social-networking software to businesses. It has more than 5 million corporate users (although not all of these will be paying customers), and it claims employees use its software at 85% of the Fortune 500.

The acquisition still has to obtain regulatory approval, not expected to be much of a problem given Microsoft’s limited activity in this area of the market.

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