Groove pockets Wintel dollars

The maker of collaboration software secures more funding from existing investors, including Microsoft and Intel Capital. But it also lays off 20 percent of its work force.

Groove Networks has secured an additional $38 million from existing investors, including Microsoft and Intel Capital, to fund its operations, the company said Wednesday.

In tandem with the funding announcement, collaboration software maker Groove said it will be reducing its work force by 20 percent, or 58 people, with its Beverly, Mass., headquarters taking the brunt of the hit.

The cash infusion creates a total of $155 million in funding over five rounds since the company was founded in 1997 by collaboration software guru Ray Ozzie. Groove launched its first product in April 2001.

Groove sells software that helps people collaborate using peer-to-peer networks--a way of linking computers, often without the need of servers--to share data or work on projects that need to harness the power of a number of computers.

In October 2001, Microsoft invested $51 million in Groove, and the two companies have worked together closely. In its latest version of Groove Workspace, release 2.5, the company integrated its collaborative applications within Microsoft's portal and messaging products.

Even with the added investment in Groove, Microsoft is still a minority owner of the company. Other owners include founder Ozzie, venture capital firm Accel Partners, and Intel Capital, the venture funding arm of chip giant Intel. All company owners participated in the latest round.

In a statement, Microsoft reiterated its interest in Groove's software, which relies on powerful desktop PCs to share information directly between people.

"We've always been excited by Groove's networked application because it represented a new breed of software that takes full advantage of the PC and the rich communication aspects of the Internet," said Jeff Raikes, group vice president of Microsoft's productivity and business services group, in a statement.

Groove has not disclosed a target date for profitability. The company currently has about 150 corporate customers, according to a Groove representative.

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