Groove Banks $38M from Microsoft, Cuts Staff

Microsoft on Wednesday raised the stakes in the big bet
on Web collaboration within its Windows Server 2003 (formerly .NET)
infrastructure, joining Intel Capital and Accel Partners in a $38 million
round of funding for Beverly, Mass.-based Groove Networks.

Microsoft, which invested $51
to acquire a minority stake in Groove in October 2001, will take
a larger unknown chunk of the collaboration software specialist with the
latest investment.

Groove spokesman Richard Eckel declined details on Microsoft’s ownership
position, which was less than 20 percent before the latest investment.
“They (Microsoft) remain a minority investor. It is safe to say they led the
round of financing,” Eckel told

Groove, a major
in Microsoft’s Visual Studio, said it had raised a total of $155
million from venture capital investors since October 1997 when Lotus Notes
creator Ray Ozzie launched the company.

The financial boost comes exactly one month after Groove lifted the
off the Groove Workspace 2.5 product, a new version that featured
tighter integration with Microsoft Outlook and SharePoint and support for
the SOAP, WSDL and UDDI Web Services protocols.

The company also announced it would eliminate about 58 positions, a move
that affects about 20 percent of its workforce. The layoffs would be
implemented in the sales, marketing and services departments and is aimed a
reducing sales and marketing costs.

“We needed to better align our costs with our expectations for the
business growth, giving the current market conditions,” Eckel said. Groove
workforce now stands at 220, with the majority at the company’s Mass.

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