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Microsoft gobbles Yammer

by Olaf de Senerpont Domis | Published June 26, 2012 at 5:00 AM

Microsoft Corp. dove headlong into the burgeoning enterprise social networking market Monday, June 25, announcing a $1.2 billion cash agreement to acquire Yammer Inc.

Redmond, Wash.-based Microsoft said that Yammer, whose private social network offerings were launched four years ago, has more than 5 million corporate users, including employees from 85% of Fortune 500 companies. The company's services include messaging and communications offerings for corporate employees.

Microsoft said it plans to accelerate Yammer's adoption alongside its other enterprise products, including Web application platform SharePoint, its Office 365 suite, its enterprise resource-planning and customer-relationship management software package dubbed Dynamics and Skype, the Internet calling service Microsoft acquired last year for $8.5 billion.

Microsoft shares closed down about 3%, at $29.86, Monday.

Under the agreement, which had been rumored for weeks, Yammer will be folded into Microsoft's Office division, which is led by president Kurt DelBene. Yammer CEO David Sacks is expected to continue leading the Yammer team once the deal closes. Sacks, a former chief operating officer at PayPal, founded Yammer in 2008.

San Francisco-based Yammer has raised roughly $142 million in venture funding from a long list of backers that includes Charles River Ventures, Founders Fund, U.S. Venture Partners, Draper Fisher Jurvetson and Khosla Ventures. Its latest round, an $85 million Series E, was announced earlier this year.

Yammer competes with the likes of Chatter, the enterprise social networking offering built by on-demand customer relationship management software giant Salesforce.com Inc. Salesforce itself has been very acquisitive in its push to build its social networking offerings for corporations. The San Francisco-based company earlier this month announced a $745 million agreement to buy Buddy Media Inc. The deal, which marks Salesforce's largest acquisition, will provide the buyer with software that enables corporations to publish and analyze the effectiveness of their social media-marketing campaigns. Salesforce last year acquired Radian6 Technologies Inc., a provider of technology that lets companies track social Web conversations, for $340 million.

Yammer also competes with Jive Software Inc., which went public last year. Shares of Palo Alto, Calif.-based Jive had climbed after speculation circulated over a Microsoft-Yammer tie-up. Jive shares slid about 5%, to $19.53, following the announcement of the Yammer acquisition Monday afternoon.

Microsoft did not hire an outside financial adviser on the Yammer deal. It relied internally on Marc Brown, its head of global M&A, and associate general counsel Keith Dolliver. Microsoft's outside lawyers included Stewart Landefeld and Andrew Moore of Perkins Coie LLP.

For legal counsel, Yammer turned to a team of Orrick, Herrington & Sutcliffe LLP lawyers that included Richard Smith, Daniel Friedland, Steve Malvey, Eric Wall, Nancy Chen, Daniel Yost, Jay Jurata, Patricia Zeigler, Libby Lefever, Anik Guha, Andrew Erskine, Kane Huang, Kime Loocke and Michael Yang.

The company hired technology investment bank Qatalyst Partners for financial advice.

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Olaf de Senerpont Domis

Bureau chief, West Coast; Editor, venture capital

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