Microsoft could be on the brink of acquiring enterprise social network Yammer for $1 billion, sources claim.
According to a report in the Wall Street Journal, a person familiar with the matter said the software giant has held takeover talks with Yammer.
Should Microsoft buy Yammer and integrate it with its CRM software, Microsoft Dynamics, it would put the company in direct competition with Saleforce.com and its Chatter enterprise social network.
Yammer was launched in 2008 to offer companies a secure private social network.
It has around four million users, is used by 200,000 companies, and has so far raised $142 million in venture capital funding.
The social network is used by around 80 per cent of Fortune 500 companies and 40 per cent of those are based in Europe.
Richard Edwards, principal analyst at research firm Ovum, said employees use social networking in many aspects of their lives.
"The idea of introducing similar kinds of tools into the workplace seems to make sense from a communication and collaboration point of view," he said.
"It is not just Microsoft eying up the opportunities afforded by the Facebook-led social paradigm shift. Established enterprise IT vendors, such as IBM, Oracle, Salesforce.com, and SAP are all busy adding social capabilities to their business software solutions."
He said Yammer would sit well with Skype, the communications product Microsoft bought last year for $8.5 billion.
The deal highlights a trend for larger software companies to purchase social networking firms to plug gaps in their portfolios.
Oracle also recently bought social media analysts Vitrue and Collective Intellect. Salesforce completed its acquisition of Buddy Media earlier this year.
Both Microsoft and Yammer have refused to comment.
