Microsoft And Yammer Acquisition Will Build Social Networking

Microsoft confirmed on Monday that it has agreed to buy online social network firm Yammer for $1.2 billion, which will allow the software maker to offer a service, similar to Facebook, to its corporate customers.

Four-year-old company, which has 5 million users of its private, in-company social networks, helps companies’ internal communications and collaboration by allowing employees to form groups and interact with each other freely. Companies such as Ford Motor Co, Supervalu and Deloitte are customers.

The 400-employee firm will keep its headquarters in San Francisco but will become part of Microsoft’s Office unit under Kurt DelBene in Seattle. Yammer will still be led by current CEO David Sacks, a former PayPal executive.

The service should fill a growing gap that Microsoft was struggling to fill with its SharePoint application for creating private websites for intra-company projects.

“This acquisition will immediately make Microsoft a strong competitor in the enterprise social market,” said Larry Cannell, an analyst at tech research firm Gartner. “It was a stretch to call the capabilities in SharePoint’s MySite feature a social network site.”

With Yammer, employees can use a private, online company directory to contact co-workers, create new networks, chat, share links and post news. A basic version of the site is free, but a subscription buys more security and integration with other company-wide software. The company’ subscription-based business model makes it different from ad-driven network companies like Facebook or LinkedIn Corp.

The deal, which values Yammer’s users at about $240 each, may ignite interest in companies offering similar services, such as Inc, Jive Software Inc and Telligent, according to Wired.

The area of internal networking for companies has attracted other big tech companies such as Cisco Systems Inc, which has a similar offering to Yammer called WebEx Social, and International Business Machine Corp with a rival product called Connections.

Microsoft, which owns a small fraction of Facebook shares, has been looking for ways to make its desktop-bound products more interactive and attractive to its core corporate users and home consumers, and has even been experimenting with its own social network called (pronounced ‘social’).

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