Microsoft said on Thursday that it would acquire collaboration software maker Groove Networks and add its virtual office technology to Microsoft’s Office suite. Groove founder Ray Ozzie, a creator of IBM’s Lotus Notes, will assume the role of Microsoft’s chief technical officer.

Terms of the deal, which is expected to close in the second quarter, were not disclosed.

Microsoft shares were up $0.17 to $25.48 in recent trading.

Founded in 1997, privately held Groove has worked closely with Microsoft for nearly five years. After the deal is completed, the nearly 200-person Groove organization will continue to operate from its Beverly, Massachusetts, headquarters as part of Microsoft’s Information Worker Group.

Redmond-based Microsoft had previously invested in Groove twice, in 2001 and 2003. Since its founding, Groove has received $155 million in financing from investors like Accel Partner and Intel’s venture capital unit IntelCapital.

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

As CTO, Mr. Ozzie will report to Mr. Gates, and be responsible for influencing collaboration offerings and associated platform infrastructure. He will also continue his work with the Groove group.

“By joining forces with Microsoft,” said Mr. Ozzie, “we can more effectively address the needs of information workers for collaboration solutions that ‘just work’ across organizational, geographic and network boundaries.”