Who Will Dominate Enterprise Social Networking?
Umang is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
First Skype and now Yammer. These are trends showing that the Microsoft Corp (NASDAQ: MSFT) is looking to give Google Inc (NASDAQ: GOOG) a tough fight on the social networking arena. Just after the rumor(reliable sources) of the Yammer acquisition for a handsome amount of 1.2 billion dollars, we see Microsoft stock rising by 2.49% in the last 3 days and Google stock going down by 2.75% in the last 5 days.
Is it a mere coincidence? Isn't it too early to predict?
First with Orkut then Google+, Google has been trying their best to create a dominance in the social networking area with little or no success. The company has been always dominant in the search engine (almost creating a monopoly) but by far has not had tasted the success of social networking (apart from the early success of Orkut).
Similarly, Salesforce.com just recently obtained Buddy Media Inc. for 745 million dollars, and Oracle Corp (NASDAQ: ORCL) obtained Collective Intent and Virtue Inc., giving both companies social media-based software.
The leader of the market in social networking is of course Facebook Inc (NASDAQ: FB) while International Business Machines Corporation's IBM connection controls the enterprise social networking realm. But Yammer has had a great impact already. This can be validated by the controversial statement made by Moskovitz (co founder of Facebook) who told the New York Times, “Work is not a social network, with serendipitous communications and photo collections. Work is about managing tasks, and responding to things quickly." This was clearly an attempt to slam Yammer.
The acquisition of this social networking site confirms the growing trend among businesses to add social media tools for their employees. These are not the only reason why this acquisition is heading towards a positive direction from the perspective of both the companies. The other reasons why it looks to be a profitable venture are:
1.Technical Acquisition: Talking in layman’s terminology, Yammer is possibly the best fit for Microsoft’s amazing office tools (Office etc.). Imagine the effect of networking on these tools. These products are already so well defined and on top of it the ability to integrate the rest of the world could act as a boon for many techies.
2. Microsoft’s entry pass to the Social world: Microsoft had two choices, either to set up its social network on its own or acquire a networking company. Well, the reason I would say the second is a better choice is simply because of the lack of expertise in this domain. On top of it if you have the required resources to expand in the domain, then simply put your feet on the pedestal.
3. Synchronization with Skype: The acquisition of Skype proved to be correct as against the odds of the critics. This acquisition would give it another boost to its existing acquisition because of the fact of integration of networking with the abilities of Skype makes it a real good deal.
All of this makes it look like a real good deal for Microsoft Corp, but to every acquisition there are many other factors which are beyond analysis like employee integration, change management, market sentiments, etc. Keeping these in mind, I would say this has a high probability of turning out to be a profitable venture. Therefore, I am bullish on Microsoft from a long term perspective.
Umang27 has no positions in the stocks mentioned above. The Motley Fool owns shares of Google and Microsoft. Motley Fool newsletter services recommend Google and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.