October 10, 2001 6:30 AM PDT

Groove swings $51 million from Microsoft

Microsoft on Wednesday said it has invested $51 million in Groove Networks, taking another step toward solidifying its strategy to let customers share files and data with Web-based collaborative software.

Privately held Groove Networks, located in Beverly, Mass., makes software that takes a Napster-like approach to sharing files, ideas and data. The company's software is likely to play a central role in Microsoft's .Net strategy, a wide-ranging plan for moving business computing applications onto the Web.

The software giant's $51 million investment gives it a minority stake in Groove, a company founded in 1997 by Lotus Notes creator Ray Ozzie. Previous investors include Accel Partners and Intel.

Groove is targeting its software to corporations for business processes such as inventory control, purchasing, distribution, auctions and customer service.

The two companies began collaborating earlier, trying to streamline the integration of Groove's software with Microsoft's Office, Windows XP and messenger applications, as well as initiatives for XML-based Web services and other .Net technologies and services. With the investment, the two companies will pull closer as they try to chip away at IBM's entrenched collaborative software, Lotus Notes.

Microsoft and Groove Networks hope to find the right balance between Web-based software and applications found on the desktop. As part of Wednesday's investment, the companies will collaborate to speed up the use of their respective technologies through a sales and marketing push.

The two companies did not detail any time frame for creating new products based on the new investment.

"There may be things in the future that come out of this that we don't anticipate," Ozzie said during a conference call. "Right now we are both focused on...integrating and enhancing technologies that customers are asking for. Microsoft is probably very interested in how...we can seed demand for some very interesting technologies that are in the context of .Net."

The investment does not tie Groove Networks exclusively to Microsoft. Ozzie said its products would work with other instant messaging services and media players.

 

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