Groove Gets Gone

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Microsoft's not-unexpected acquisition of Groove Networks earlier this month signifies the current software situation. And that is: The big get bigger and the small innovators get bought. Or merged out of existence. Or just disappear.

The fact that Microsoft had already bought a big chunk—maybe 40 percent—of Groove prior to the final buyout signaled its intentions. Sources say the current deal is worth between $150 and $155 million.

Microsoft execs were always wary of talking about just how much, if any, of Groove's technology would flow into Microsoft's own products---say SharePoint. Presumably, Redmond can now do what it will with that technology and provide workspaces that really do work well across firewalls etc.

Microsoft insiders say to watch for Grooviness to show up in Office 12, the successor to the current Office 2003. (Almost forgot, here's Mitch Kapor's take on the deal.)

One can also presume that a Linux version of Groove's wares, a possibility Groove Founder and CEO Ray Ozzie never ruled out, is off the table. Ozzie said if demand warranted such a thing, it would be forthcoming.

Sources say Groove, widely lauded for its secure yet-easy-to-set-up workspaces, wasn't exactly hitting the cover off the ball profit- or revenue-wise. Its trailing 12-month revenue was about $22 million—a figure that the company would not confirm but sources close to Groove say is in the ballpark.

Sources also say the deal was all but done last fall except for some disagreement over how many developers would stay on the east coast and how autonomous the group would be. Time will tell how much freedom Ozzie et al. will have out of their Beverly, Mass. headquarters. Microsoft insiders say groups within the company are clamoring for the Groove guys' expertise but the company is not known for doing well when it imports high-level execs from other companies. How long did Rick Belluzzo last again? Joe Eschbach? Mike Sinneck?

The fact that Microsoft won Ozzie, whose Lotus Notes dominated the nascent groupware/collaboration space and still vies with Microsoft Exchange as the corporate e-mail champion, must be sweet for Bill Gates, always a big Ozzie fan.

On the other hand, who's to say Ozzie will stay at Microsoft any longer than he stayed at the IBM-owned Lotus? He left IBM in 1997, about two years after the Lotus deal. Some betting types put good money that he'll beat his record out the door this time around.

Some rank-and-file Groovites were irritated that their options were cancelled in the deal while top dogs like prez and COO David Scult, VP and general counsel Jeff Seul and finance guy Jack Martin apparently got a million clams each.

Well, just as it is with software companies, the rich get richer and the poor, well ... you get the picture.

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