Microsoft announced early Thursday that it will acquire Groove Networks and integrate Groove's Virtual Office collaboration software into the Office System lineup. Groove's founder, Ray Ozzie, will become chief technology officer of Microsoft and report directly to company chairman Bill Gates.

Groove Virtual Office enables workers to share information, manage projects and hold meetings no matter where they are located geographically. Groove's products were already closely tied to Microsoft's Office applications, which will aid in the transition.

"I'm surprised Microsoft took this long. Groove has long offered collaboration technology complimentary to Microsoft's and in an area where the software giant wants to expand. The acquisition fits like a glove," said Jupiter Research senior analyst Joe Wilcox.

Ray Ozzie, who invented Lotus Notes, is perhaps an even more significant catch than Groove's software, noted Wilcox. "Ozzie is an esteemed innovator -- and longtime Microsoft rival when at Lotus and later IBM -- whom I expect to bring much value to his new employer. From a technology and personnel perspective, the acquisition is a win, win. No doubt about it."

"Ray and his team are true innovators. Microsoft and its customers will greatly benefit from their experience," said Bill Gates. "After working with Ray for years as a close partner, it will be great to have him on our senior leadership team."

Terms of the deal were not disclosed, although Microsoft was previously a major investor in Groove.