Rumors had been swirling around lately that software giant Microsoft was on the edge of acquiring online networking company Yammer in a deal potentially worth over $1 billion. A couple of sources familiar with the matter had informed Bloomberg last week, who claimed in their reports that Microsoft Corp was in discussions with Yammer Inc. to buy the company. On June 25, Microsoft made an official announcement that they have acquired Yammer for $1.2 billion.

While, Yammer will become part of the Redmond based company's Office division and the CEO of Yammer David Sacks will remain, the motive of the deal has been described by the officials as an effort to provide more Facebook-like features to its corporate customers. Yammer is used primarily as a tool for group communication and collaboration within companies and had started off, looking very much like an early version of Facebook.

However, unlike Mark Zuckerberg's creation, Yammer proclaims itself "the enterprise social network" and offers no pretense of competing in the casual socialization stakes. Overall, the company specializes in building private social networks that enable employees within the company to track each other's work.

Hence, the Yammer deal announced by Microsoft is part of the company's effort to adapt to changing technology that is driving demand for more Internet-connected services and social networking tools.

Microsoft, a minority investor in Facebook since 2007, has been moving to broaden its reach into social networking ahead of the release of Windows 8. The deal adds "a best-in-class enterprise social-networking service to Microsoft's growing portfolio of complementary cloud services," said Microsoft CEO Steve Ballmer.

Analysts also predict that adding Yammer would  also help Microsoft to step up competition with Salesforce.com, which gained social-marketing tools through its $745 million purchase of Buddy Media Inc. earlier this month, and Oracle, which recently bought two companies that analyze data on social-media sites -- Vitrue and Collective Intellect.

Yammer, started in 2008, is used by more than 200,000 companies, including Ford Motor Co. and EBay Inc. It provides features for internal corporate use that are similar to those found on Facebook Inc.'s Web site.

The San Francisco startup was founded by David Sacks, the former chief operating officer at PayPal Inc. It has raised more than $140 million in funding from venture firms, including Charles River Ventures Inc. and Emergence Capital Partners.