Microsoft to Acquire Business Software Maker Groove Networks

Microsoft Corp. said Thursday that it was acquiring Groove Networks Inc., whose software helps far-flung businesspeople collaborate.

The company also will hire Groove founder and Chief Executive Ray Ozzie, a software veteran and co-creator of Lotus Notes. Ozzie will become one of three chief technical officers, focusing on communication and collaboration technology throughout the company’s product lines. He will report directly to Microsoft Chairman Bill Gates.

The acquisition is part of an effort by the world’s largest software maker to extend its Office brand in an increasingly mobile business world. Groove’s technology could also eventually find its way into such Microsoft products as the next generation of Windows operating systems, company executives said.

Microsoft and privately held Groove did not disclose financial terms of the deal. The companies have worked closely for years, with Microsoft twice investing an undisclosed amount of money in Groove.

Founded in 1997, Beverly, Mass.-based Groove employs about 200 people, who will remain there after the acquisition.

Groove makes software that allows workers to collaborate remotely through “virtual offices.” One reason the software is popular is because a user doesn’t always need to be online for it to work.

The software is a central component in the Bush administration’s Homeland Security Information Network, a primary vehicle for U.S. agencies, organizations and corporations to share important but unclassified information about national security threats.

Other companies use the product to share documents, coordinate business deals and communicate with one another even when workers are on the road or in various offices throughout the world.

Nate Root, a vice president with Forrester Research, called the deal very good, if not unexpected news, for Microsoft.

The company’s market-leading Office line remains a key cash cow for the company, having brought in $2.78 billion in revenue in the quarter ended Dec. 31. But the company has conceded that it is getting harder to sell businesses on new versions of its Outlook e-mail, Word and Excel spreadsheet applications, so it has increasingly looked for ways to extend the brand.

Microsoft shares rose 12 cents to $25.43 on Thursday on Nasdaq.