) announced that it has entered into a definitive agreement to
acquire Yammer for $1.2 billion in cash. The boards of directors of
Microsoft and Yammer have approved the deal but the acquisition is
subject to customary closing conditions, including regulatory
Yammer, the San Francisco-based social networking site, specializes
in creating private social networks so employees within the same
company can form groups for free interaction. The firm has 5
million corporate users and its clientele includes Ford Motor Co,
Supervalu and Deloitte.
Yammer will join the Microsoft office division and the division
president, Kurt DelBene will remain at the helm. It will continue
to be headquartered in San Francisco and led by its current CEO
Microsoft will add Yammer's corporate-social networking tools to
its Office and SharePoint, its cloud-based enterprise offering that
includes email, Web conferencing, file sharing and the Microsoft
Office suite of Web applications. The acquisition will likely boost
file sharing and chat capabilities within Microsoft Office, which
generates more than half of Microsoft's annual operating income. In
fact, Microsoft Office's SharePoint already features some of these
capabilities, though they are not widely used in the corporate
Last year, Microsoft acquired online chat company Skype for a
massive $8.5 billion. The company also plans to integrate Yammer's
enterprise software offerings into the video-chat service Skype.
Yammer provides features similar to those found on
). The purchase will help Microsoft compete with corporate-social
) Chatter, as well as startups such as
Jive Software Inc.
) and Asana Inc.
Reuters stated that
Cisco Systems, Inc
) are already offering internal social-networking capabilities to
their clients. While Microsoft appears to be way behind in the
race, it has made a couple of big acquisitions and should not be
written off just yet.
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Very recently, Microsoft made a bold move by stepping into the
intensely competitive tablet market with the launch of its Windows
8-based tablet named "Surface" to compete with
) iPad. Microsoft has designed Surface to run on the upcoming
Windows 8, the biggest change to the company's operating system in
nearly two decades.
We believe that Microsoft's current investments are supported by
its strong balance sheet and expect these to drive the next growth
phase, improving prospects of market share gains.
In the near term, however, we expect growing optimism and believe
that positive estimate revisions could raise the Zacks Rank from
the current #3, which implies a Hold recommendation for the short
term (1-3 months).