Software Giant Microsoft has given a Green Signal to acquire Enterprise social network Yammer at a whooping cost of $1.2 Billions in Cash.
Microsoft CEO, Steve Ballmer 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”.
Yammer specializes in creating private social networks so employees within the same company can keep tabs on what colleagues are working on. That’s similar to how Facebook’s online social network allows friends and families to track what’s happening in each other’s personal lives.
Talk of a deal had circulated earlier this month, but the two companies only confirmed the deal on Monday.
Four-year-old Yammer, which has 5 million users of its private, in-company social networks, will become part of Microsoft’s Office unit under Kurt DelBene but will still be led by current Chief Executive David Sacks. Yammer, which is based in San Francisco, had raised about $142 million since its inception four years ago.
Yammer CEO David Sacks said, “I am pleased to announce that Yammer has signed a definitive agreement to be acquired by Microsoft. After the close of the deal, Microsoft will continue to invest in Yammer’s stand-alone service, and the team will remain under my direction within the Microsoft’s Office Division”.
David said, “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,” he added.
The acquisition represents Microsoft’s latest attempt to adapt to a major shift in the technology industry, one that is fueling demand for more Internet-connected services and social-networking tools.
The upheaval is threatening to marginalize Microsoft Corp., the world’s largest software maker, and ultimately diminish the amount of money coming in from sales of its Windows operating system and a wide range of applications designed primarily for personal computers.
As part of its effort to remain relevant, Microsoft paid $8.5 billion last year for Internet video chat service Skype in the largest acquisition in its history.
In another bold move, Microsoft last week unveiled its own tablet computer, Surface, to compete with Apple’s iPad. Microsoft has designed Surface to run on the upcoming Windows 8, the biggest change to the company’s operating system in nearly two decades.
Microsoft will have much of the same autonomy given to Skype since that deal closed eight months ago. Yammer will continue to be run from its San Francisco headquarters by its co-founder and CEO, David Sacks. It will also continue to provide its services separately from Microsoft’s offerings.
Investors couldn’t muster much enthusiasm for the deal on another somber day for the stock market. Microsoft’s stock fell 82 cents, or nearly 3 percent, to close at $29.88.
Although other companies such as Jive Software and Salesforce.com are building social networks for businesses, Yammer shares the most DNA with Facebook Inc.
Sean Parker, the former Facebook president depicted by Justin Timberlake in the 2010 movie “The Social Network,” also sits on Yammer’s board of directors. Parker still owns a 4.6 percent stake in Facebook currently worth about $2.2 billion.
Microsoft has its own financial ties to Facebook, having invested $240 million in the social network in 2007. After selling $250 million in stock in Facebook’s initial public offering last month, Microsoft still retains a 1.7 per cent stake worth about $840 million.
As a privately held company, Yammer hasn’t disclosed its revenue. In a Monday note about the Microsoft deal, Nomura Securites analyst Rick Sherlund estimated Yammer’s revenue at $15 million to $20 million last year.
The company has been expanding so rapidly that it had been considered a prime candidate to pursue an IPO by next year.
The stock of Yammer rival Jive Software has gained 65 per cent since it went public six months ago, though it fell 74 cents Monday to close at $19.75.
“Yammer adds a best-in-class enterprise social networking service to Microsoft’s growing portfolio of complementary cloud services,” he added.
Kurt DelBene, president of Microsoft Office Division said in his blog post, “The combination of Yammer, SharePoint and Office 365 will provide the most comprehensive and flexible solutions for enterprise social networking. Over time, I see opportunity for exciting new scenarios by adding Yammer’s stand-alone service alongside and integrated into our collaboration offerings with SharePoint, Office 365, Dynamics and Skype”.
The acquisition is subject to customary closing conditions, including regulatory approval.