is buying internet start-up Yammer for 1.2 billion US dollars (£770 million) in an attempt to bring Facebook-like sharing features to its widely used suite of business software applications.
Yammer specialises in creating private social networks so employees within the same company can keep tabs on what colleagues are working on. That's similar to how Facebook's online social network allows friends and families to track what's happening in each other's personal lives.
The deal, announced Monday, comes nearly two weeks after word of Microsoft's negotiations with Yammer first leaked out in published reports.
The acquisition represents Microsoft's latest attempt to adapt to a major shift in the technology industry, one that is fuelling demand for more internet-connected services and social-networking tools.
The upheaval is threatening to marginalise Microsoft, the world's largest software maker, and ultimately diminish the amount of money coming in from sales of its Windows operating system and a wide range of applications designed primarily for personal computers.
As part of its effort to remain relevant, Microsoft paid 8.5 billion US dollars (£5.4 billion) last year for internet video chat service Skype in the largest acquisition in its history.
In another bold move, Microsoft last week unveiled its own tablet computer, Surface, to compete with Apple's iPad. Microsoft has designed Surface to run on the upcoming Windows 8, the biggest change to the company's operating system in nearly two decades.
Microsoft chief executive Steve Ballmer is counting on Yammer's sharing tools to ensure that long-established Microsoft applications, including its word processing and spreadsheet programs, remain vital components for getting work done. Google has emerged as a threat with a toolbox of similar programmes that run primarily over the internet rather than on individual machines.
"Think of Yammer as a fundamental part of our Office family," Mr Ballmer said.
Microsoft will have much of the same autonomy given to Skype since that deal closed eight months ago. Yammer will continue to be run from its San Francisco headquarters by its co-founder and chief executive, David Sacks. It will also continue to provide its services separately from Microsoft's offerings.