The deal signifies another step in Microsoft's efforts to build an all-encompassing set of software programs for small and large businesses. The acquisition of Visio furthers the company's focus on so-called "knowledge workers," a term used for employees who use computers and the Internet to get their jobs done.
Each share of Visio will be exchanged for 0.45 shares of Microsoft.
Visio makes software that businesses use to make sophisticated charts and diagrams, that can then be added to a Microsoft PowerPoint presentation or Word document, for example.
"Visio has been a pioneer in delivering unique diagramming solutions to business and enterprise customers and represents a strong addition to the Microsoft family of business products," said Bob Muglia, a Microsoft senior vice president.
Led by Muglia, Visio will operate within Microsoft's business productivity group as a separate division. Visio's products will be offered as a separate product in the Microsoft Office family of personal productivity and business applications, the company said.
Although Microsoft underlined how Visio compliments its Office products, analysts believe Visio software could be a valuable addition to Microsoft's plans for Back Office.
"Some of Visio's tools graphically represent the whole network. It makes sense for Microsoft to utilize this in the Back Office, because these types of the tools make it more easier to manage," said Rob Enderle, an analyst at Giga Information Group.
Jeremy Jaech, Visio's chief executive, will lead Microsoft's Visio division as a vice president reporting to Muglia. Visio co-founder Ted Johnson and current chief technology officer, will also become a company vice president charged with directing future product development.
News.com's Erich Luening contributed to this report