News reports that Microsoft is about to acquire the Yammer enterprise social network company drew scathing reactions from industry analysts, who said that the deal would do nothing to improve the software giant’s growth prospects because it is getting into the market too late.
Microsoft is apparently making efforts to
acquire enterprise social networking vendor Yammer, according to a report by Bloomberg.com,
but several industry analysts say the potential move won't do anything to
help give Microsoft new opportunities for vibrant market growth.
may pay more than $1 billion
, and a deal may be reached as soon as
tomorrow, said one person, who declined to be identified because the
negotiations are private," Bloomberg
If the deal goes through, it would be
pointless, said financial analyst Trip Chowdhry of San Francisco-based Global
Equities Research. "If they acquire Yammer, it wouldn't really do anything
for Microsoft," he said. "It's just like their lack of a mobile
strategy. The market has already been taken."
Part of the problem, Chowdhry said, is that
Microsoft is trying to bolster its offerings in the enterprise social
networking market too late against innovative competitors such as
Salesforce.com and Oracle Corp., which offer well-developed products that have
good adoption rates among business users.
"They're late to the party," he
said of Microsoft. "They should be doing things that no one else has been
doing before. I dont think it makes sense."
Jonathan Yarmis, principal analyst with The
Yarmis Group, agrees. "In some ways, it's about¦time that Microsoft did
this," he said. "The fact that theyve got to spend $1 billion [to
add these capabilities] is in some ways an acknowledgement of a massive
The potential deal would clearly highlight
the disappointing adoption of Microsoft's SharePoint application, which has
been touted by the company as a tool for enterprise collaboration, Yarmis said.
"SharePoint is a rudimentary file-sharing application, and I dont care
about what they say everybody is doing with it. At the end of the day, it is a
file-sharing application and not an enterprise social network. Thats why they
are looking to buy Yammer. They had to go out and buy one because they didnt
build one for themselves."
What the possible move does show, he said, is
that Microsoft has "made an admission of failure and that they're actually
going to buy something to fill this hole. They could have been building this
Yet even if the deal goes through, Yarmis
said, it still won't position Microsoft as the No. 1 player in the enterprise
social networking market.
"There is no category brilliance
here," he says of Yammer's products. Yammer includes all the tools that competitors
include, from micro-blogging capabilities to group functions to wikis and more,
he said. "Yammer doesn't have superior features or anything over their
competition, but Microsoft certainly gives them a distribution reach" if
the deal is finalized. "For competitors like Jive, I can't imagine that
this is a good day for them."
Another analyst, Rob Enderle, principal
analyst of The Enderle Group, said Microsoft has typically had a rough time
with these kinds of acquisitions in the past because the innovative developers
who created the acquired products usually don't stick around.
"You acquire a firm that does what you
want to do," Enderle said. "The key is retaining the people from that
company. Thats often been a problem for Microsoft. Its the people who have
the skill sets for Yammer's products so they're going to have to figure a way
to retain these people better."
Enterprise social networking applications
have been adding several key features for businesses in the enterprise
marketplace as of late, including giving employees the ability to collaborate
without emails and meetings as well as the capability to share ideas in real
time anywhere in the world. Yammer lets companies create secure, private social
networks for their employees, bringing together features and user interfaces
that are similar to Facebook and Twitter.
Yammer is used by more than 200,000 companies
around the world, according to the company's Website, including DHL, LG,
Nationwide Insurance, Ford Motor Co., Shell, Capgemini and Razorfish.
In April, Yammer announced that was adding
with Microsoft's Dynamics CRM application.