Microsoft and Groove Networks Announce Strategic Relationship

BEVERLY, Mass. and REDMOND, Wash., Oct. 10, 2001 — Microsoft Corp. and Groove Networks Inc., the leading provider of decentralized software for secure business collaboration, today announced a strategic relationship designed to advance the delivery of Web and peer services to businesses. As part of the relationship, Microsoft has invested approximately $51 million in Groove Networks, resulting in a minority equity stake. Previous investors, including Accel Partners, also participated in Groove Networks $54 million financing.

“When Groove™ was first introduced about a year ago, we indicated how excited we were about the technology, not only because of its advanced use of our .NET tools and infrastructure, but also because it represented a new breed of innovative software that takes full advantage of the PC and the rich communication aspects of the Internet,”
said Steve Ballmer, CEO of Microsoft.
“As our investment indicates, we are even more enthusiastic about Groove today than we were a year ago. We look forward to working with Ray and his team to deliver solutions to our customers that further advance our vision of empowering people through great software — any time, any place and on any device.”

“Microsofts investment in Groove Networks indicates just how important this relationship is to both companies,”
said Ray Ozzie, CEO of Groove Networks.
“For nearly a year, we have been working with Microsoft on several initiatives, as our early customers have asked for tighter integration with Office applications, interoperability with Windows® Messenger, and an understanding of how we will employ .NET technologies and services. Weve made significant progress on these and other initiatives, and now look forward to working even more closely with Microsoft to ensure that we capitalize on the strengths of our respective technologies to deliver cross-enterprise collaboration solutions for our customers.”

Shared Vision and Continued Collaboration

Both Microsoft and Groove Networks believe that utilizing an appropriate mix of centralized and decentralized infrastructure is critically important to organizations of all sizes. Microsoft® .NET and Windows XP technologies, combined with Groove Networks collaboration technologies, will enable customers to work together effectively within and across organizational boundaries, and will provide software developers with unprecedented flexibility in integrating peer and Web services. As part of the strategic relationship, the companies will collaborate to accelerate the adoption of their respective technologies through customer-driven product, sales and marketing initiatives.

In the past year, the companies have worked together closely on a shared vision for XML-based Web and peer services, focusing efforts in several areas, from programming languages and a variety of .NET services to Office, Windows XP and real-time communications initiatives.

“Were excited to be taking our relationship with Ray and Groove Networks to the next level and look forward to delivering to businesses, developers and the industry as a whole a unique set of productivity-enhancing services that take advantage of our mutual commitment to XML-based Web services,”
said Jeff Raikes, group vice president of the Business Productivity Group at Microsoft.

A Unique Software Platform

Groove Networks unique software platform enables organizations to extend critical business processes, projects and meetings across time, space and organizational boundaries. Its adaptive, self-healing communications architecture ensures high availability and seamless operations across firewall boundaries. Because the product is not dependent on centralized Web servers, it has an extremely low vulnerability to single points of failure, making it uniquely suited for uninterrupted and secure cross-business operations.

A year ago this month, Groove Networks first introduced its Groove software, which allows business teams to collaborate on a broad range of activities within secure, shared virtual spaces, in real time or offline. When integrated with centralized and Web-based business systems, Groove adds a
“person-to-person interaction layer”
that can streamline cross-company processes with customers, partners and suppliers. In a recent article in Harvard Business Review, business consultant and author Michael Hammer said streamlining cross-company processes is
“where this decades productivity wars will be fought.”

Since launching the commercial version of Groove software earlier this year, the company has attracted customers such as GlaxoSmithKline, Andersen, and the Defense Advanced Research Projects Agency, among others. Additional information about Groove software offerings is available at .

About Groove Networks

Founded in October 1997 and headquartered in Beverly, Mass., Groove Networks Inc. provides software and services that enable organizations to extend critical business processes, projects and meetings across time, space and organizational boundaries. The companys board of directors is composed of Ray Ozzie, chairman; James Breyer, managing partner of Accel Partners; and Mitch Kapor of Kapor Enterprises. More information about Groove Networks can be found at . More information about enterprise sales can be found at .

About Microsoft

Founded in 1975, Microsoft (Nasdaq
) is the worldwide leader in software, services and Internet technologies for personal and business computing. The company offers a wide range of products and services designed to empower people through great software — any time, any place and on any device.

Microsoft and Windows are registered trademarks or trademarks of Microsoft Corp. in the United States and/or other countries.

Groove Networks and Groove are trademarks of Groove Networks Inc.

The names of actual companies and products mentioned herein may be the trademarks of their respective owners.

Note to editors: If you are interested in viewing additional information on Microsoft, please visit the Microsoft Web page at on Microsofts corporate information pages.

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