Microsoft's In The Groove

The combination of Office, SharePoint, and Microsoft's Real-Time Communications platform with Groove's peer-to-peer (P2P) and secure authentication technologies--two weak links in Microsoft's portfolio--will finally enable cross-company collaboration, Gates said.

"The addition of Groove to the Office system family gives us a trifecta of collaborative products," he said. "It will extend our lead in collaboration. The way people work across locations and different organizations requires new technologies."

As part of the deal, unveiled late last week, Gates appointed Groove Networks Chairman, CEO and founder Ray Ozzie, the creator of Lotus Notes, to serve as one of three Microsoft chief technology officers. Groove will continue to operate from its Beverly, Mass., location.

Microsoft will integrate Groove's P2P and security features into Longhorn-era products such as Office 12 and SharePoint, Gates said. "One big thing about Longhorn will be its peer-to-peer capabilities," he said. Other Microsoft executives said Groove's technology will also be integrated into Microsoft business applications.

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Microsoft partners said the deal is a win, win, win for the company, the channel and Gates.

"It's a huge coup for Microsoft," said David Via, a vice president at Wolcott Systems Group, Fairlawn, Ohio. "It could be to Groove what IBM's acquisition of Lotus was back in '95--a huge accelerator."

Ted Dinsmore, president of Conchango, a Microsoft solution provider based in New York, said the deal addresses the lack of offline and mobility features in Microsoft's workgroup platform.

"This fills in a hole in the office to backoffice position for Microsoft. Offline [support] is the hole," said Dinsmore. "With this acquisition, there are no competitors that have this depth. The question then becomes, what will IBM do now?"

Once again, observers said, IBM Lotus' loss is Microsoft's gain. "I've thought about hiring Ray and his team for a long time," Gates said. "It's a big day for me."

BARBARA DARROW contributed to this story.