Microsoft is buying virtual-office software company Groove Networks for an undisclosed sum. Groove's products will be pulled into Office, along with its development team.

Once approved, Groove will become part of Microsoft's Information Worker business unit. The deal does pose some interesting questions over Longhorn however, as well as the next version of Office designed to fully exploit Longhorn.

"Microsoft has two big releases coming next year in Longhorn and Office 12, which are radically different from their predecessors. They both have millions of lines of code, hundreds of developers, and programming teams well into their development phases. It is going to be hard to take a step back and stitch new technology and strategies into those products," said Nate Root of Forrester Research.

Root and other analysts said they had been expecting the acquisition for some time, and generally think it makes strategic sense. "Microsoft and Groove have been outstanding partners. Microsoft has been able to kick a lot of business Groove's way because Groove fills in a gap that Microsoft does not have any technology in, the offline collaboration market. It is a smart move," Root said. "The one downside is, it might be a smart move that is happening a little later than what would have been ideal," he added.

The fact Microsoft is making Groove founder Ray Ozzie its CTO demonstrates that his role will be larger than simply seeing the deal through. Instead, he looks certain to play an integral role in shaping Microsoft's overall collaboration strategies with new products.

In a prepared statement, Jeff Raikes, Microsoft VP in charge of the Information Worker Business unit, said the deal makes sense because the companies have a shared vision for collaboration. He said Groove complements Microsoft's collaboration products "by helping us better serve businesses with mobile workers and remote offices and will assist Microsoft in being able to offer both small and large companies more integrated collaboration software and services."

Currently Microsoft has Office SharePoint Portal Server and Windows SharePoint Services that allow IT shops to create and manage shared spaces for groups of information workers within an IT-based network.

Microsoft initially invested $51 million in Groove amounting to a 20 percent stake. Through other investments from Microsoft and other financing since then, Groove has received some $155 million in funding.



Ozzie, the creator of Lotus Notes, will report directly to Microsoft chairman Bill Gates.