Software giant, Microsoft is planning to acquire Yammer Inc in an all cash deal worth $1.2 billion under an attempt to attract business users with tolls that are similar to those in consumer social networking sites.

San Francisco-based, Yammer is the operator of a social network for business users and is likely to help the company challenge other social networking sites in the corporate sector. The company will become a part of Microsoft's Office division. The staff at Yammer will continue their services under Chief Executive Officer David Sacks, the two companies said.

Mr. Sacks, who is a former chief operating officer of PayPal, had founded the company in 2008. The company has since been able to emerge as a player among leading business social networks. Yammer offers more than
200,000 companies such as Ford Motor Co. and eBay Inc. Yammer is often called Facebook for the workplace as the company offers similar social networking tools for business users.

The deal will make Microsoft a direct competitor to corporate social features like Salesforce. com Inc.'s Chatter product, as well as startups such as Jive Software Inc. and Asana Inc.