June 25, 2012 – Microsoft said it will pay $1.2 billion in cash for Yammer, the emerging enterprise social network provider it plans to sync up with its Office, Skype and cloud offerings.

Yammer enables on-demand portals to create and join private, in-house social networks with related analytics and collaborative tools. Microsoft, in a statement on the proposed deal, said it would continue to develop Yammer’s offerings as well as connect them to its own collaboration features for SharePoint, Office 365, Microsoft Dynamics and Skype, the video-phone provider which it purchased in the fall of 2011 for $8.5 billion.

CEO Steve Ballmer specifically pointed to Yammer as part of its “portfolio of complimentary cloud services.” The move also comes a week after Microsoft introduced Surface, its tablet business-use rival to the iPad,  which Saugatuck Technology analyst Bruce Guptill wrote comes with deep capabilities for social business work.

Five-year old Yammer is based in San Francisco and claims 5 million enterprise users of its free basic and pay enhanced versions. The deal is subject to closing conditions. The Yammer team will join the Microsoft Office Division and continue to report to Yammer CEO Kurt DelBene.

Research firm IDC recently ranked Yammer as the eighth largest enterprise social network in terms of revenue in 2011, though it is the vendor with the largest increase in sales from the previous year. Yammer registered $22.3 million in revenue last year, an approximately 123 percent jump from 2010. By comparison, ESN market leaders IBM tallied $105.4 million in 2011 (75.1 percent increase from 2010) and Jive Software hit $65.3 million in 2011 revenue (up 72.8 percent from 2010), according to IDC.

There have been a flurry of deals for social collaboration and mobile app providers in the last few months, including Salesforce.com’s buy of marketer Buddy Media.

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