That’s according to financial newspaper Calcalist, which predicts the acquisition will mean Microsoft will use the company as a base for cyber security in Israel.
Microsoft is desperately attempting to re-engineer its business and the cloud has become ever important to it as it struggles to catch with up vendors IBM and Amazon.
Adaliom has received funding from VCs Sequoia Capital and European Index Ventures and from HP and EMC, it appears.
The company specialises in securing data held in cloud services and prevent it being hack.
Microsoft has not yet commented on the rumour.