Microsoft Completes Groove Acquisition

Microsoft completed the $120 million acquisition of Groove Networks last week, after quickly overcoming a shareholder challenge from a dissatisfied former Groove executive.

The Beverly, Mass.-based Groove with about 200 employees is now a part of the Microsoft Information Worker Business run by group vice president Jeff Raikes. Groove founder Ray Ozzie becomes one of Microsoft's three chief technical officers reporting to chairman and chief software architect Bill Gates.

Groove Virtual Office is collaboration software for ad-hoc workgroups. It relies on peer-to-peer connections and has synchronization capabilities tailored for mobile workers who work online and offline. The peer-to-peer approach adds to Microsoft's portfolio of collaboration technologies in the Microsoft Office System and in Windows Server 2003.

Ozzie and Raikes will be busy sorting out the strategy for integrating and marketing Microsoft's SharePoint Portal Server, Windows SharePoint Services, Exchange, Outlook and other Microsoft technologies with Groove Virtual Office.

Microsoft and Groove closed the deal on Friday, a week after a judge in Delaware denied a motion by former Groove executive vice president Michael Matthews to block the sale. Matthews alleged that employees who had been issued common and junior preferred stock were not adequately compensated in the deal.

When Microsoft and Groove made the deal public March 10, neither party discussed financials. According to the lawsuit, Microsoft agreed to pay $120 million and would get back $80 million of that as Groove's largest investor. The sale price was less than the $155 million previously invested in Groove by all parties, including Accel Partners, Intel Capital, Ozzie and Lotus Development Corp. founder Mitch Kapor.

About the Author

Scott Bekker is editor in chief of Redmond Channel Partner magazine.