An interesting rumor was floating around last week in TechVille, which stated that Microsoft (NASDAQ:MSFT) was planning to buy Yammer, the Facebook-esque (NASDAQ:FB) private social network for the enterprise. It is one of the most popular social discussion platforms for enterprise clients and also offers file sharing tools and social collaboration features. Apparently, that has turned out to be true — Microsoft just announced that it has acquired Yammer for $1.2 billion in cash. 
Microsoft’s CEO, Steve Ballmer, said:
- Microsoft Earnings: Cloud Growth Shines Through As PC sales Play Spoil Sports
- Microsoft Earnings Preview: Cloud Revenue To Increase, OS Revenue To Falter
- Will Microsoft’s Surface Phone Succeed Where Windows Phone Failed?
- Microsoft’s PowerApps Aim To Disrupt Enterprise Mobile App Development Market
- Microsoft Earnings: Cloud Fillips Revenue Even As OS Sales Decline
- Microsoft Earnings Preview: Cloud First Strategy To Boost Revenues, Mobile First To Erode Profitability
“The acquisition of Yammer underscores our commitment to deliver technology that businesses need and people love. Yammer adds a best-in-class enterprise social networking service to Microsoft’s growing portfolio of complementary cloud services.”
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 are now trying to overtake the lumbering giant, especially in the cloud-based software space.
Salesforce.com (NYSE:CRM) as well as Jive Software, which recently went public, are some of its biggest competitors in the enterprise social software market. Even Google (NASDAQ:GOOG) is making quite a few strides in this space, and it continues to make Google Apps more social.
With the acquisition, Microsoft not only gets Yammer’s enterprise user base, but can also bolster its business offerings like SharePoint, Dynamics and Outlook. Yammer could be integrated with Microsoft’s own online services and could make way for numerous cross-selling and up-selling opportunities. There are a lot of synergies for Microsoft in this deal, which would justify the relatively high price it is willing to pay.
Yammer will continue to develop its standalone service with support for multiple platforms, but we can expect increased integration with Microsoft’s other complementary offerings like SharePoint, Office 365, Dynamics and Skype, going forward.
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.Notes: