June 25 (Bloomberg) -- Microsoft Corp. agreed to buy corporate social-network operator Yammer Inc. for $1.2 billion in cash to help it woo businesses with Facebook-like tools that help employees collaborate in the workplace.
San Francisco-based Yammer will become part of Microsoft’s Office division and the team will continue to report to current Yammer Chief Executive Officer David Sacks, the companies said today in a statement.
Yammer provides features -- similar to those found on Facebook Inc. -- to more than 200,000 companies such as Ford Motor Co. and EBay Inc. The purchase will help Microsoft compete with corporate-social features like Salesforce.com Inc.’s Chatter product, as well as startups such as Jive Software Inc. and Asana Inc., run by Facebook co-founder Dustin Moskovitz.
“They’ve been behind in terms of social, and this puts them in a really strong position, perhaps even the lead,” said Rob Koplowitz, an analyst at Forrester Research Inc. “There are a lot of communications that are being generated by social.”
Yammer was founded in 2008 by Sacks, the former chief operating officer at PayPal Inc., and Adam Pisoni, who currently serves as chief technology officer. It has raised more than $140 million in funding from venture firms, including Charles River Ventures Inc. and Emergence Capital Partners.
Microsoft, based in Redmond, Washington, will add Yammer’s corporate-social networking tools to its Office and SharePoint software products for businesses. Large information-technology companies are snapping up nimbler startups, sometimes before they reach an initial public offering, spending $17.4 billion on enterprise software acquisitions in 2011, compared with $715.5 million in 2009, data compiled by Bloomberg show.
Besides integrating Yammer into existing products, Microsoft will continue to offer it as a standalone service, Office Division President Kurt DelBene said on a conference call. The deal is likely to be completed in the third quarter.
While DelBene couldn’t say when Yammer features would appear in Microsoft’s Office 365 cloud-based applications or in SharePoint, he said that the cloud apps get updated quarterly, or even monthly in some cases.
Yammer works with Apple Inc.’s iPhone and Google Inc.’s Android and that will continue under Microsoft, the companies said. The software gives companies a private way to help employees communicate. For example, supermarket chain Supervalu Inc. uses it to let sales people talk and share ideas.
Sacks will become a vice president in the Office division. Yammer will keep its San Francisco office and employees, he said in an interview.
“Both I and my co-founder are committed to staying at the new company and continuing to run Yammer for a long time to come,” Sacks said.
Yammer was advised by Frank Quattrone’s Qatalyst Partners LLC, according to a person with knowledge of the matter, who asked not to be identified because the information hasn’t been made public. Business Insider previously reported Qatalyst’s involvement.
The Yammer deal follows other recent enterprise-software purchases centered on social media. Salesforce.com will gain social-marketing tools through its $745 million agreement to purchase Buddy Media Inc. earlier this month, and Oracle Corp. recently announced plans to buy two companies that analyze data on social-media sites. Those are Vitrue Inc. and Collective Intellect Inc.
Microsoft shares fell 2.7 percent to $29.87 at the close in New York. The stock has gained 15 percent this year.
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