Microsoft invests $51 m in Groove Networks

Adam Pasick

NEW YORK: Microsoft Corp. said on Wednesday it invested $51 million in Groove

Networks, a firm that uses the peer-to-peer networking to help businesses

collaborate over the Internet.

Groove, founded by Lotus Notes creator Ray Ozzie, had already announced its

support for Microsoft's .NET initiative to deliver services over the Web, but

Microsoft's new minority equity stake of almost 20 percent aligns Groove even

more closely with the Redmond, Washington-based software giant.

"It certainly makes Groove long-term viable," said Aberdeen Group

analyst Dana Gardner. "They've got a sugar daddy behind them to make sure

they'll be able to progress and evolve in the marketplace."

Ozzie told Reuters Groove has no immediate plans to seek further funding. On

top of the $51 million from Microsoft, the company raised about $3 million from

previous investors, including Acel Partners. "We're on an IPO (initial

public offering) path, but we don't have plans for that right now," he

said."

Decentralized data



Peer-to-peer networking transfers files without relying on a central server
computer, sending data between computers in a sort of decentralized daisy chain.

Groove's software, freely available in a preview edition at http://www.groove.net

, lets users chat and swap files online in virtual "shared spaces,"

protected by encryption to keep sensitive communications secure.

But it may be the basic peer-to-peer technology that drew Microsoft's eye,

rather than the shared workspace Groove offers. "(Peer-to-peer) is a

nuts-and-bolts technology Microsoft can use in .NET," said IDC analyst

Robert Mahowald.

Microsoft has no plans to merge Groove with its Sharepoint collaboration

software, Group Productivity Vice President Jeff Raikes told Reuters in an

interview.

"We've already seen good collaboration on Groove and Sharepoint,"

he said, adding the two products are largely complimentary. Groove is also

tightly integrated with Microsoft's instant messaging software.

.Net rising?



Using partnerships to add to .NET rather than acquiring firms outright may also
help Microsoft on the all-important public relations front, addressing customer

fears of the software giant's dominance.

"The more partnering Microsoft brings to the table, the less of an aura

Microsoft is corralling people to its services and products," Gardner said.

Either way, Groove stands to profit from its association with the far-reaching

Microsoft initiative, according to Mahowald.

"There's so much hype - good and bad - about .NET," he said.

"Being the wagon pulled by that tractor can only be a good thing."

(C) Reuters Limited 2001.