Microsoft to Acquire Yammer for $1 Billion, We Think It Makes Sense

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Microsoft (NASDAQ:MSFT) is apparently planning to acquire Yammer, the Facebook-esque (NASDAQ:FB) private social network for the enterprise. Yammer is one of the most popular social discussion platforms for enterprise clients. It also offers file sharing tools and software which facilitates collaboration. Microsoft may have had a great start in enterprise software as well as the first mover advantage with Office, but it has started to slow down and many scrappy startups have started to overtake the lumbering giant, especially in the cloud-based software space. [1]

Check out our complete analysis of Microsoft

Salesforce.com (NYSE:CRM), specifically, as well as Jive Software that recently went public are some of its biggest competitors in the enterprise social software space. Even Google (NASDAQ:GOOG) is making quite a few strides in this space, and it continues to make Google Apps more social.

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With the acquisition, Microsoft not only gets Yammer’s enterprise user base, but it can also bolster its business offerings like SharePoint, Dynamics and Outlook. Yammer could be integrated with Microsoft’s own online services, and make way for numerous cross-selling and up-selling opportunities. There are a lot of synergies for Microsoft in this deal, which justifies the relatively high price it’s willing to pay for Yammer.

The acquisition could propel Microsoft to the forefront of the cloud-based enterprise software revolution again.

We currently have a $40 Trefis price estimate for Microsoft, which stands nearly 30% above its market price. Office and business software accounts for most of its value.

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Notes:
  1. Yammer Sells Itself to Microsoft, WSJ []