Bangalore: Microsoft has agreed to acquire Yammer, an internet startup for a deal of US$1.2 billion in cash. The talk of a deal had rumoured earlier this month, but the two companies confirmed the news only on Monday through an agreement.

Yammer is a maker of cloud-based enterprise social networking (ESN) software, which was founded in the year 2008, it started as a messaging tool for companies, but quickly developed into a wider enterprise social network. Yammer’s CEO David Sacks, the former COO of PayPal will continue to lead the operations while Yammer becomes part of Microsoft's Office Division, headed by President Kurt DelBene, Microsoft said.

"Yammer will be an important addition to Microsoft's cloud services and this acquisition underscores our commitment to helping customers move to the cloud. Together we'll deliver the most complete solution in the marketplace," DelBene said during a press conference to discuss the deal.

Sacks said that this merger will help Yammer in a big way and becoming  part of Microsoft will give the Yammer team an extensive expertise and resources that will allow the product to reach "massive scale," he said.

"Microsoft is one of the few software companies whose products are household names. Today's announcement signals the beginning of our plans to make Yammer one of them as well," Sacks said.

In addition Steve Ballmer, CEO of Microsoft said that Yammer has maintained a perfect balance between fostering "viral" adoption of its product while also giving IT departments the necessary security and management features.

"The so-called consumerization of IT is a trend which I think perhaps more than almost any other company out there Yammer has gotten right," Ballmer said.

With this acquisition Microsoft attempts to soup up its internet presence and position itself to improve the ESN capabilities in its enterprise products like Office, SharePoint and Lync, an area in which Microsoft has been seen as trailing competitors.