Groove Lands Big Microsoft Investment

A $51 million investment by Microsoft Corp. in Groove Networks Inc. likely paves the way for more integration of Grooves peer-to-peer collaboration software into Microsofts own collaborative applications and other technologies.

The investment, announced Wednesday, gives Microsoft a minority stake in Groove and made up the lions share of a $54 million funding round for the P2P company, which was founded by Lotus Notes creator Ray Ozzie.

Microsoft CEO Steve Ballmer said in a statement that Groove, which debuted its software a year ago, represented a “new breed of innovative software that takes full advantage of the PC and the rich communication aspects of the Internet.” He also praised Grooves “advanced use” of Microsoft .Net tools and infrastructure.

“As our investment indicates, we are even more enthusiastic about Groove today than we were a year ago,” Ballmer said in the statement. “We look forward to working with Ray [Ozzie] and his team to deliver solutions to our customers that further advance our vision of empowering people through great software – any time, any place and on any device.”

Grooves namesake software uses a Napster-like P2P technology that allows business teams to collaborate on activities within secure, shared virtual spaces. It doesnt rely on centralized Web servers, but on the shared computing power of its individual users, reducing its vulnerability to single points of failure, according to officials at the Beverly, Mass., company.

Microsoft, of Redmond, Wash., and Groove Networks have in the past worked together on Extensible Markup Language-based Web and peer services, including programming languages, .Net services, Office and Windows XP and instant messaging, officials said. The equity investment will extend those product integration initiatives and create joint sales and marketing initiatives, as well.

“For nearly a year, we have been working with Microsoft on several initiatives, as our early customers have asked for tighter integration with Office applications, interoperability with Windows Messenger, and an understanding of how we will employ .NET technologies and services,” said Ozzie, Groove Networks CEO, in a statement. “Weve made significant progress on these and other initiatives, and now look forward to working even more closely with Microsoft to ensure that we capitalize on the strengths of our respective technologies to deliver cross-enterprise collaboration solutions for our customers.”

Dennis Callaghan covers collaboration and can be contacted at dennis_callaghan@ziffdavis.com.