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Microsoft buys Yammer for $1.2 billion

The deal will boost the enterprise social networking capabilities in Office, SharePoint and other Microsoft collaboration products

By Juan Carlos Perez, IDG News Service
June 25, 2012 03:35 PM ET

IDG News Service - Microsoft has agreed to acquire Yammer, a maker of cloud-based enterprise social networking (ESN) software, for US$1.2 billion in cash, a deal rumored to be in the works for the past week-and-a-half.

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Yammer, which was founded in 2008, will continue to be led by its CEO David Sacks as it becomes part of Microsoft's Office Division, headed by President Kurt DelBene, Microsoft said on Monday.

"Yammer will be an important addition to Microsoft's cloud services and this acquisition underscores our commitment to helping customers move to the cloud. Together we'll deliver the most complete solution in the marketplace," DelBene said during a press conference to discuss the deal.

Becoming part of Microsoft will give the Yammer team a boost in expertise and resources that will allow the product to reach "massive scale," Sacks said.

"Microsoft is one of the few software companies whose products are household names. Today's announcement signals the beginning of our plans to make Yammer one of them as well," Sacks said.

Microsoft CEO Steve Ballmer said Yammer has struck a balance between fostering "viral" adoption of its product while also giving IT departments security and management features they need.

"The so-called consumerization of IT is a trend which I think perhaps more than almost any other company out there Yammer has gotten right," Ballmer said.

ESN software provides Facebook- and Twitter-like capabilities adapted for workplace use, including employee profiles, activity streams, discussion forums, microblogging, wikis, idea generation software, joint document sharing and editing as well as tagging, rating and reviewing of content.

ESN products have become popular in recent years as tools that, when properly implemented and adopted, can improve the way employees collaborate and communicate, leading to increased efficiency and productivity, by complementing traditional applications like email and instant messaging.

Spending on ESN products grew almost 40 percent last year to $767.4 million, and is expected to grow at a 42 percent compound rate through 2016, when it will reach almost $4.5 billion, according to IDC.

Yammer competitors include Jive Software, NewsGator, Socialtext and Tibbr. In addition to ESN specialists like Yammer, larger software vendors have also been adding ESN features to their broader collaboration suites and enterprise applications, including IBM, Oracle, and Cisco.

With the Yammer software, Microsoft puts itself in a position to improve the ESN capabilities in its communication and collaboration products like Office, SharePoint and Lync, an area in which Microsoft has been seen as trailing competitors.

"This immediately makes Microsoft a stronger competitor in the enterprise social market," said Larry Cannell, a Gartner analyst. "It's a recognition by Microsoft that today's information worker isn't just focused on content. They need help working together and building relationships with others."

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