Microsoft: Groovy Baby!

ZDNet has the scoop: Microsoft to buy Groove Networks, and here is the press release.  There is no mention of terms for this acquisition, but I have a hard time seeing a big payoff for investors. Groove had raised around $200M from the likes of Accel Partners, Intel and yes, Microsoft which had invested north of $80M. I have no data point  as to the sales or deployments of Groove, but having had numerous demos of the product over the years, I have never been quite convinced of its applicability as a mainstream collaboration tool. Even though I was a big fan and long time user of Lotus Notes, my primary email/collaboration application from 1994 to 2004.

From the day Microsoft invested, it was quite clear that the plan was to eventually get their hands on the company, and I suspect, Ray Ozzie. I recall a statement from Ballmer a couple of years ago, during the yearly venture get together Microsoft  organizes in the Valley: he was explaining that they would not do VC investments any longer, except for Groove "just because they love that guy and his vision". We'll figure out at some point whether this was a strategic acquisition, or a cheap buyout of the portion Microsoft did not already own - depending on the color of Groove's operating cash flows: black or red.

Of note is also the fact that Ozzie will become CTO of Microsoft. According to their executive management summary , Microsoft already has two CTOs: Craig Mundie and David Vaskevitch. They both report directly to Bill G. It will be interesting to see how Ozzie gets positioned, and which remit he will have. From the press release:

Ozzie will assume the role of chief technical officer, reporting to Bill Gates, Microsoft founder, chairman and chief software architect, with responsibility for influencing corporatewide communication and collaboration offerings and associated platform infrastructure. Ozzie also will continue his work with the Groove team, which will be part of Microsoft's Information Worker Group.

I am sure that our favorite Scoble will tell us more about it, in due course. And I suspect that we'll see a post at some point on Ray's blog. 

Mitch Ratcliffe just published an analysis regarding the deal, in which he makes a comparison with IBM's acquisition of Lotus and its impact on IBM's consulting revenues. I don't see in Groove the same ubiquity and leverage potential as Lotus in its time. Wikis, blogs, discussion forums offer free or very low cost collaboration infrastructures that might limit Groove to higher end projects.

A MSNBC video (IE only :-) of Bill Gates/Ray Ozzie provides a few additional insights:

• Ozzie will focus on building Groove further, and support the shaping of collaboration/communication features in Office and Windows.
• A clear driver for the acquisition was (quite obviously) getting hold of talents, technology and experience. Market share, customers, etc. were not discussed.
• For the foreseeable future, Groove will be run "independantly" from their MA headquarter, which is an integration model only rarely used by Microsoft. They generally move companies to Redmond in a short order.
• Some of the p2p features of Groove should make it into Longhorn (target: calendar year 2006).