(By Mani) Microsoft Corp. (NASDAQ:MSFT) said it was buying Yammer, a privately-held provider of social and collaboration solutions for the enterprise, for $1.2 billion in cash to boost its enterprise social networking tools. However, the question is whether Microsoft was bit late in joining the social party and able to withstand strong competition from Salesforce.com, Inc. (NYSE:CRM) and Oracle Corp.(NASDAQ:ORCL).
Founded in 2008, Yammer provides a free service for employees to join a private social-network that's intuitive and easy to use. It has a premium version charging $5 per user, per month, to gain administrative control over these social networks. It also enables IT departments to easily transition an employee driven initiative into a managed, social-networking solution.
San Francisco-based Yammer had raised $142 million in venture funding from top tier firms. Yammer and Facebook share the same first investor, Peter Thiel; backed by Social+Capital Partnership – a fund established by former Facebook Vice President, Chamath Palihapitiya
Yammer, which is currently adding more than 250,000 corporate users per month, has more than 5 million registered corporate users, including employees from 85 percent of the Fortune 500, according to the company website. Yammer's clientele includes Deloitte, Ford, Nationwide, 7-Eleven, Orbitz Worldwide, Rakuten, and Telefonica O2.
This acquisition would move Redmond, Washington-based Microsoft closer to enterprises around the world, expanding the company's market reach and enhancing the broader cloud service portfolio with solutions like SharePoint, Office 365, Microsoft Dynamics and Skype.
The deal comes at a time when social computing is making a huge impact in how employees connect with information and each other. Businesses are just starting to take advantage of the benefits of social computing.
"We view this acquisition as a positive for MSFT as it enhances the company's reach into the enterprise social networking and collaboration space," Oppenheimer analyst Shaul Eyal wrote in a note to clients.
The software giant will now be able to offer solutions for enterprises looking to enhance productivity and collaboration by allowing business to build secure internal social networks, where employees can post announcements, share files, create events and swap messages.
The combination of Yammer, SharePoint and Office 365 will provide the most comprehensive and flexible solutions for enterprise social networking. Over time, Microsoft may add Yammer's stand-alone service alongside and integrate into its collaboration offerings with SharePoint, Office 365, Dynamics and Skype.
"I picture people being able to use Yammer to manage and expand their professional relationships, share and collaborate on Office documents, stay informed about content updates, and to seamlessly move from status updates and feeds into voice and video conversations," Kurt DelBene, President, Microsoft Office Division, wrote in a blog post.
The acquisition fits well for Microsoft from a strategic perspective as it should further accelerate Microsoft's ability to bring enterprises a wide range of powerful cloud services and enhance worker productivity.
However, some analysts feel that Microsoft is too late to the social party and may find difficult to compete with Salesforce.com's Chatter and Oracle's social relationship management tools, leaving no third slot left for Microsoft. It would also face competition from startups such as Jive Software Inc. (NASDAQ:JIVE).
Skeptics of the deal argue that the scenario is no different from what Microsoft's Windows 8 is suffering in the mobile market for a number three spot as the first two positions are taken by Google, Inc.'s (NASDAQ:GOOG) Android and Apple, Inc.'s (NASDAQ:AAPL) iOS.
"Imitation is not a strategy. A company cannot get into a leadership position by imitating the leaders, which in this case is Salesforce.com and Oracle," Global Equities Research analyst Trip Chowdhry said in a client note.