Microsoft Buys Yammer in $1.2bn Cash Deal [VIDEO]

After weeks of speculation Microsoft has finally announced the purchase of corporate social networking service Yammer for $1.2bn (£768m) in cash.

Yammer will join the Microsoft Office Division, which is led by division President Kurt DelBene, and the team will continue to report to current Yammer CEO David Sacks.

"The acquisition of Yammer underscores our commitment to deliver technology that businesses need and people love," said Steve Ballmer, CEO, Microsoft.

"Yammer adds a best-in-class enterprise social networking service to Microsoft's growing portfolio of complementary cloud services."

In an official statement Microsoft said that Yammer will continue to develop its standalone service and "maintain its commitment to simplicity, innovation and cross-platform experiences".

The service already integrates with Microsoft's own business social networking service SharePoint.

"Moving forward, Microsoft plans to accelerate Yammer's adoption alongside complementary offerings from Microsoft SharePoint, Office 365, Microsoft Dynamics and Skype," the statement continued, suggesting Yammer will eventually be integrated further into Microsoft's range of products.

"Think of Yammer as a fundamental part of our Office family," Ballmer told a news conference while announcing the deal.

Launched in 2008, Yammer now has more than five million corporate users, including employees in 85 percent of the Fortune 500 companies.

The service allows employees to use their corporate email address to join a secure, private social network for free and then makes it easy for firms to convert that into a company-wide service for all staff.

"When we started Yammer four years ago, we set out to do something big," Yammer CEO Sacks said.

"We had a vision for how social networking could change the way we work. Joining Microsoft will accelerate that vision and give us access to the technologies, expertise and resources we'll need to scale and innovate."

However, a rival corporate social network says the Microsoft buyout has had prospective customers calling to defect from Yammer.

Tony Zingale, CEO of Jive Software, said calls had increased in the two weeks since the Yammer buyout rumours began.

"Clearly if the momentum in these kinds of calls pick up, we'll structure something formally and offer it publicly to Yammer customers," Zingale told Bloomberg. "Not everybody is a huge Microsoft fan."

Trip Chowdry, MD of equity research at Global Equities Research, was critical of the amount Microsoft paid for Yammer.

"This would have been a great acquisition if they paid $50m or $100m at most. It just doesn't make sense," Chowdry told eWeek.

"The valuation seems high," agreed Wesley Miller, an analyst at research firm Directions. "This is Microsoft recognising a valuable player in the field. The reality is, Yammer has a name, brings a fair amount of users and offers an experience which SharePoint doesn't."

Most analysts had a similar response when Facebook bought photo-sharing app Instagram for $1bn, consdering Instagram had yet to make any money.