Microsoft shells out $1.2bn for Yammer

Software giant Microsoft has entered into a definitive agreement to acquire enterprise social networking site Yammer for $1.2 billion.

The private social networking site was launched in 2008, claims to have more than five million corporate users across 200,000 businesses and is free to join.

Microsoft is one of the few software companies whose products are household names and today signals the start of our plans to make Yammer one.

According to Yammer's chief executive, David Sacks, the site counts Ford, Nationwide Insurance and CapGemini as users.

Yammer will become part of the Microsoft Office Division, but is expected to continue operating as a standalone service, once the deal closes.

In a conference call, announcing the deal yesterday, Kurt DelBene, president of the Microsoft Office Division, said the firm is already planning to merge Yammer with several parts of its product portfolio.

"If you're a Yammer customer, you'll continue to get secure, private social networking for your company, delivered with the same focus on simplicity, innovation and cross-platform experiences," he said.

"Over time, you'll see more connections to your investment in SharePoint, Office 365, Dynamics, Skype and other cloud services."

DelBene said this integration will happen as new versions of the products are released.

"We're excited about Yammer as a standalone service, and we don't have an end date for that," he added.

Speaking on the same call, Sacks said the deal would help his firm become a household name.

"After four years of phenomenal growth, we're still just as passionate about our vision for enterprise social networking and there's no better way to scale that ambition than to join forces with Microsoft," he said.

"[It] is one of the few software companies whose products are household names [and] today's announcement signals the beginning of our plans to make Yammer one."

Richard Holway, chairman of analyst house TechMarketView, described the deal as a sensible move for Microsoft.

"I've always been supportive of companies doing a series of M&A deals to fill strategic technical or geographic needs," he wrote in an alert to subscribers earlier today.

"The only eyebrow raising' bit of the deal is the price - $1.2b for a four year old company with very little revenue. But its mere small change compare[d] to Microsoft's bank balances," he added.