Microsoft: Yammer On America

Jun.26.12 | About: Microsoft Corporation (MSFT)

In an article that I wrote a week ago, everyone was speculating what Microsoft's (NASDAQ:MSFT) big announcement would be last Monday night. There were leaks about the company buying Yammer, building a new tablet, or even partnering with Barnes and Noble (NYSE:BKS) to build an e-reader. Many articles even said B&N was jointly announcing the big news with the Tech Giant. But the "Big" announcement really was a new Microsoft Tablet. And unless you have been on another planet for the last eight days, you already know everything there is to know about the new Surface.

The news went viral worldwide. And then on Wednesday, Microsoft introduced the new Windows Phone 8 which will work with the new tablet due to a Shared Windows Core. The ink had barely dried on my Microsoft article yesterday, when the company announced Monday that it is indeed buying the "office social media site" Yammer. According to a Microsoft press release, the two companies have reached a definitive agreement for $1.2 Billion in cash:

"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."

Launched in 2008, Yammer now has more than 5 million corporate users, including employees at 85 percent of the Fortune 500. The service allows employees to join a secure, private social network for free and then makes it easy for companies to convert a grassroots movement into company wide strategic initiative.

Yammer will continue to develop its standalone service and maintain its commitment to simplicity, innovation and cross-platform experiences. Moving forward, Microsoft plans to accelerate Yammer's adoption alongside complementary offerings from Microsoft SharePoint, Office 365, Microsoft Dynamics and Skype.

Chart forMicrosoft Corporation

So now we have three major announcements from Microsoft in one week. You can see from the chart above that the company is up 20% for the year compared to the other major market indicators. And in spite of the entire market taking a beating on Monday, it has been up this past week for what will probably go down in history as "Microsoft Week". Also, keep in mind that a big announcement concerning the joint venture with B&N, that I mentioned above, will eventually be forthcoming. So what is Yammer? And how will it benefit MSFT? According to Bloomburg Bussinessweek:

Yammer provides features -- similar to those found on Facebook Inc. (NASDAQ:FB) -- to more than 200,000 companies such as Ford Motor Co.(NYSE:F) and EBay Inc. (NASDAQ:EBAY). The purchase will help Microsoft compete with corporate-social features like Inc. (NYSE:CRM)'s Chatter product, as well as startups such as Jive Software Inc. (NASDAQ:JIVE) and Asana Inc., run by Facebook co-founder Dustin Moskovitz.

"They've been behind in terms of social, and this puts them in a really strong position, perhaps even the lead," said Rob Koplowitz, an analyst at Forrester Research Inc. (NASDAQ:FORR)."There are a lot of communications that are being generated by social."

Ballmer wants to "pour more" into Yammer, but he was not specific how that would be accomplished. Many people and analysts have compared Yammer to Facebook . According to the Wall Street Journal:

Ray Wang, principal analyst at Constellation Research, said companies should be leery of consumer-inspired technologies that don't actually adopt the spirit of those technologies. "It has to adopt the personal metaphor for it to work. It has to map to how people communicate naturally, how they share information naturally, how they connect with people and how they treat information." In the consumer world, a site like Facebook allows people to show off, to one-up their friends and to establish bragging rights for something, Wang said. Those attributes can be translated into the office environment, and that's what CIOs should look for in a social networking product.

If Microsoft adds this to their new enterprise software, more and more employees will be able to Yammer at work about their job, family, and that summer vacation they planned for two years. It seems rather pricey (1.2 billion) right now at a little less than $250 per employee, based on 5 million current employees using the service. And they are very picky about their service. When I tried to join, they rejected me based on the fact that my email "looked" like a personal email address. And when I wrote asking about that, I received an email restating my question. If I find out anything more about that, I will leave an update in the comments section.

Although I was extremely skeptical of the Yammer deal at first, I can see the possibilities now after further research. Happy employees are more productive, and seem to be healthier in general. And they are nicer to their customers. It is the old "What comes around goes around". I saw a cartoon a long time ago where a boss was screaming at an employee, and then the employee went home and screamed at his wife. She in turn screamed at her little boy, who promptly went outside and kicked the dog.

Well the customer is the dog! They are the last one in a line of commands that begin with the CEO. In any business, if the workers are upset, they will probably take it out on the customers. The ultimate reason to have this service, is communication at the work place. Sharing information is good for any company, but in the future that will have to be done via Microsoft office products. The company promises to keep the "standalone" company (Yammer) running for now. But that will most likely change in the future.

Disclosure: I am long MSFT.