Microsoft Gets Groove Deal Done

With the deal having just closed, though, it is too soon to tell whether the Groove products will be sold through the Microsoft channel on a standalone basis, said Microsoft Group Product Manager Dan Leach.

"We are still going through the process of evaluating the sales, services, channel and partner strategies for those (Groove) products and services," said Leach. "We are working through that. We want to make sure we make the right decisions for Microsoft, Groove customers and Microsoft and Groove partners going forward."

John Marks, the CEO of JDM Infrastructure, a Microsoft partner in Rosemont, Ill., urged Microsoft to expand distribution of the Groove product through Microsoft's existing partners.

"Anytime a channel company makes an acquisition and there is a doubt that the product will go through the channel it is a bad precedent," said Marks. "It should be assumed that the product will go through the channel. Why wouldn't Microsoft want to leverage all of their Microsoft partners to grow sales for the Groove product?"

Currently, only a small percentage of Groove product sales are through partners in the United States although the company was laying groundwork for a channel program and had a few system integrator alliances stateside.

Leach stressed that Microsoft is committed to selling current and future Groove products on a standalone basis. The Groove development team is currently working on the next release of the collaboration software.

"We are still evaluating how best we can add Groove and the Groove technologies to the lineup of our services, our servers and products in a way that helps customers," said Leach.

Microsoft officials have said the company will integrate Groove's P2P and security features into Longhorn-era products such as Office 12 and SharePoint and other Microsoft business applications.

But Microsoft insiders also say it may be very difficult for the company, reknowned for a "not-invented-here" attitude, to rationalize the Groove technology with its own collaboration know-how which is exposed via the SharePoint Portal Server and Windows SharePoint Services.

As part of the deal, Groove Networks Chairman, CEO and founder Ray Ozzie, the creator of Lotus Notes, will serve as one of three Microsoft chief technology officers. Ozzie, who will report to Microsoft Chairman and Chief Software Architect Bill Gates, will continue to work closely with the Groove team from the company's Beverly, Mass., location.

The closure of the deal comes after a former Groove executive unsuccessfully sought an injunction to block the deal in a Delaware court.

According to court documents, Microsoft paid $120 million for the part of Groove it did not already own. That deal left groups of Groove common and junior-preferred stockholders short changed, charged the plaintiff, Michael Matthews, Groove's former executive vice president.

In the suit Matthews alleged that Groove management and directors breached their fiduciary responsibility to adequately pay employees for the buyout.

Barbara Darrow contributed to this report.