Software giant Microsoft Corp. announced on Monday, June 25, that it has agreed to buy business-oriented social networking firm Yammer for $1.2 billion in cash. Shares of the Redmond, Washington-based company dropped 2.7 percent to close to $29.86 after the announcement, underscoring the importance of cloud computing and social networking in the enterprise market for information technology.
Social networking company Yammer allows firms to set up social networking sites for their corporate needs. Employees can set up a free account, and companies can pay for an upgrade to receive more advanced services. According to Microsoft, Yammer has more than 5 million corporate users, accounting for more than 85 percent of the Fortune 500 companies.
Yammer started out as a messaging tool for companies, but quickly evolved into a wider social network. It offers a basic free service, as well as a more advanced premium service for a $5 monthly fee per user. Microsoft said it plans to integrate Yammer with its other products, including Skype and Microsoft Office.
According to Microsoft CEO Steve Ballmer, Yammer will contribute to the company's "growing portfolio of complementary cloud services." There have been various rumors recently reporting Microsoft's interest in acquiring Yammer, and the integration makes sense. "It's a perfect fit for our cloud plans," said Microsoft's Kurt DelBene. "We have a very aggressive plan to move our core capabilities to the cloud with Office 365 and Yammer fits right in."
Through cloud computing, businesses can access computing power through a network rather than depending on in-house data centers. Cloud computing is gaining increasingly more importance in today's tech world, and the great popularity of social networking sites such as Facebook and LinkedIn has encouraged companies to start incorporating social networking features to their networks.
"It's nice to see Microsoft picking up the pace of acquisition," BGC Partners analyst Colin Gillis wrote in emailed comments, as cited by Marketwatch. The analyst added that Microsoft was "layering in social components into collaboration tools."
Meanwhile, Forrester Research analyst Rob Koplowitz believes Microsoft can "position Yammer as part of a broad horizontal collaboration offering," he wrote in a blog post earlier this month. "This would mean that Microsoft, in one fell swoop, becomes good at social and places it adjacent to their very strong market offerings in email, unified communications, workspaces, etc," explained the analyst. "If Microsoft plays their cards right, they seriously cripple the ability for competitors to disrupt their market-leading position in collaboration, and likely place themselves as long-term leaders in enterprise social."
