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It's Official: Microsoft to Acquire Yammer

Price Is $1.2 Billion Cash on the Barrelhead

Microsoft has, as leaked a couple of weeks ago, gone ahead and cut a deal to buy the Twitter-y enterprise social network Yammer for $1.2 billion cash to extend its cloud services and protect its revenue flank.

The four-year-old start-up and its 400 people will be sent to the Office Division when the acquisition closes in Q3. Yammer CEO David Sachs, the former COO of PayPal, will report to Office president Kurt DelBene.

Yammer's five million-odd verified corporate users reportedly include 85% of the Fortune 500.

Yammer offers a free secure private network hoping to trigger a viral "grassroots movement" that it can convert into a company-wide initiative competing with Microsoft for $5 a head every month. Customers pay to upgrade their network with administrative and security controls, integrations with enterprise applications, priority customer service and a so-called designated customer success manager.

Microsoft plans to accelerate Yammer's adoption by integrating it with SharePoint, Office 365, Microsoft Dynamics, Outlook and Skype. It says the service will develop new capabilities and scale bigger. It will also continue to be offered as a standalone product.

Yammer already integrates with SharePoint.

Yammer raised an $85 million fifth round led by Draper Fisher Jurvetson in February. All Things Digital says the "implied valuation" then was around $600 million so Microsoft is paying double. Yammer has raised $140 million altogether.

The blog also said Yammer's free users are notoriously hard to convert into paid users and suggested it's hard to integrate.

Yammer may have a million paid subscribers.

Rival Jive Software, which IPO'd late last year, forces users to pay after a 30-day trial. It reportedly has 676 companies paying. Cisco's got WebEx Social, Salesforce has Chatter and IBM a thing called Connections.

Yammer has iPhone and Android apps. It was reportedly advised by Midas-like Qatalyst Partners.

Microsoft, which owns a slice of Facebook, closed down 2.7% at $29.86. Yammer has added Facebook-like features since it started on Peter Thiel's nickel. He was Facebook's first major investor and worked with Sacks at PayPal. 

More Stories By Maureen O'Gara

Maureen O'Gara the most read technology reporter for the past 20 years, is the Cloud Computing and Virtualization News Desk editor of SYS-CON Media. She is the publisher of famous "Billygrams" and the editor-in-chief of "Client/Server News" for more than a decade. One of the most respected technology reporters in the business, Maureen can be reached by email at maureen(at)sys-con.com or paperboy(at)g2news.com, and by phone at 516 759-7025. Twitter: @MaureenOGara

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