Blog Post

Is Yammer worth $1B?

Microsoft’s (s msft) reported $1 billion deal to buy Yammer isn’t done yet, but the move — despite what many see as a too-hefty price tag — could make sense.

Yammer has big name recognition in the burgeoning field of enterprise social networking — its product lets colleagues chat about projects and share tips in a business-defined context. Microsoft Office remains the market-leading productivity suite despite incursions by OpenOffice, LibreOffice and Google Apps rivals. Pairing the Office with Yammer makes sense, as Forrester Research analyst Rob Koplowitz wrote in Forbes.

Or the software giant could go narrower and yoke Yammer to the Microsoft Business Solutions’ CRM and ERP products — ripping a page out’s Chatter playbook. Or it could do both and put Yammer everywhere. Right now, Microsoft wants workgroups to collaborate using SharePoint on the backend but many IT people find SharePoint a bit of a hairball to implement and support. Microsoft also has its own instant messaging client, but what’s a little overlap among friends?

Whatever the case, new IDC research shows this might be a good deal for Microsoft as more businesses want to deploy enterprise-class chat. IDC found that nearly all the vendors in this market showed double-digit growth from 2010 to 2011, with IBM(s ibm) and startup Jive delivering a whopping 70 percent growth over that period. (Jive, which went public December, has seen its share price rise 17 percent this year, closing Friday at $18.67.) But Yammer beat them all — showing year-over-year growth of 132.3 percent in that time frame. Presumably that is revenue growth — there’s no word on profitability.

According to a research note by  IDC Group VP Michael Fauscette:

Companies are turning to social software in increasing numbers as they look for ways to increase collaboration, improve both business and individual worker productivity, and efficiently manage a growing deluge of content and information … Compartmentalized and specific collaboration is still required by many organizations and traditional collaborative applications providing closed loop and B2B communications will retain their existence in organizations alongside more open social solutions.

But the interest is there and that’s why a cool billion (or $1.2 billion) for Yammer might not be the worst idea Microsoft ever had.

Photo courtesy of Shutterstock user Sukhonosova Anastasia

5 Responses to “Is Yammer worth $1B?”

  1. Reblogged this on vijaya prasad and commented:
    Microsoft buying Yammer means that Microsoft wouldn’t have to build an alternative to Yammer. Yes it’s a billion dollars, but if anyone can afford it, it’s Microsoft (and maybe Facebook?). They already own a segment of the business market, I think this would be a smart move on Microsoft’s part.

  2. Tim Woods

    On the one hand, Yammer has a lot of customers. However, on the other hand, they are still a young company and have a lot of bugs to work out in their software.

    I think they do have the potential to be a billion dollar company, but not right now … but then again Instagram was paid $1B for what amounted to a facebook picture sharing app so I don’t know what’s worth $1B anymore.

  3. Michael Curry

    We are one of the largest cloud Lync providers operating in the USA and we are excited to the fact that Yammer could be integrated with the Microsoft product set. Social media is a much needed tool within the ecosystem of any company whereas it takes collaboration to it next level. Nothing in the market today comes close to the ease of use and productivity that Lync brings to the table either in a dedicated server environment or in the cloud like Workspace Communications provides. Great job Microsoft, I’m sure the folks over at AVAYA, Cisco and ShoreTel are wondering what to do next.