Yammer, Co-Founded by David Sacks '98, Sold to Microsoft for $1.2 Billion

Excerpteed from the June 25 New York Times:

Microsoft announced on Monday that it would buy Yammer, a social network service for businesses, for $1.2 billion in cash, as it seeks to strengthen its enterprise software business and compete more directly with Salesforce.com.

Under the terms of the deal, Yammer will be added to Microsoft’s office division and will continue to be led by David Sacks, its chief executive.

Yammer, which calls itself “the enterprise social network,” is a sort of Facebook for business. Its Web-based service allows companies to create private social networks, where employees can privately chat, shares files and collaborate on projects.

“The acquisition of Yammer underscores our commitment to deliver technology that businesses need and people love,” Steven A. Ballmer, Microsoft’s chief executive, said in a statement. “Yammer adds a best-in-class enterprise social networking service to Microsoft’s growing portfolio of complementary cloud services.”

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Yammer was co-founded in 2008 by Mr. Sacks, a former PayPal executive who spun the business out of Geni, a genealogy and social networking site.

Over the last four years, the service has grown at a rapid clip, as more companies turn to the Web for secure solutions to enhance interoffice communication and collaboration. Yammer, which offers both free and subscription services, has more than five million users and is used by more than 85 percent of Fortune 500 companies.

It has raised a total of $142 million in venture capital, recently adding $85 million in late February, in a financing round led by Draper Fisher Jurvetson. The company’s roster of investors and board members is stacked with former Facebook executives and members of the so-called PayPal mafia. Founders Fund, the venture firm led by a PayPal co-founder, Peter Thiel, and Social+Capital, a firm partially backed by Facebook, are both major backers. Sean Parker, the former president of Facebook and an executive general partner at Founders Fund, is a board member.

In recent months, Yammer has aligned itself more closely with the software giant. In April, Yammer acquired oneDrum, a British start-up focused on file sharing and enterprise collaboration solutions, for an undisclosed sum. At the time of the acquisition, Mr. Sacks highlighted the value of the start-up’s applications for Microsoft products, citing the popularity of Microsoft’s Office documents.

“When we started Yammer four years ago, we set out to do something big,” Mr. Sacks said in a statement. “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.”