Yahoo Shells Out $350M for Zimbra

Yahoo picks up Zimbra and its AJAX-based collaboration suite to compete with Google, Microsoft and IBM.

Yahoo said it has agreed to purchase open-source e-mail and collaboration software maker Zimbra for $350 million.

The deal, announced Sept. 17 after market close, is part of the media and search portals bid to build out its Internet and collaboration services to better compete with chief threats Google, Microsoft and IBM.

Yahoo said in a statement that Zimbra, which offers an AJAX (Asynchronous JavaScript and XML) client that bundles e-mail, contacts, shared calendar, search and VOIP (voice over IP) that can be used both on and offline, will help it expand its presence in universities, businesses and through ISPs.

With Zimbras assets, companies may host e-mail on or off premises with their own domains, and allow knowledge workers to create mashups, called Zimlets, that tie in various Web services to e-mail.

Click here to read more about Zimbras Collaboration Suite 4.5.

Zimbras software will extend Yahoos 10-year-old consumer Web mail service to schools, SMBs (small and midsize businesses) and ISPs, wrote Brad Garlinghouse, senior vice president of communications and communities at Yahoo, based in Sunnyvale, Calif., in a blog post. Garlinghouse noted that Zimbra powers collaboration at Georgia Institute of Technology, Digg and Mozilla.org.

"Combining the best of Zimbra with whats made Yahoo Mail the top dog in Web mail will not only allow us to cater to these markets better than anyone, it will allow us to expand our presence to partners and consumers at school, work and home," Garlinghouse said.

IDC analyst Mark Levitt told eWEEK that Zimbra proved that a startup can break the dominance long-established vendors have had in the integrated collaboration software space.

"Microsoft and IBM dominate this market that represents the dominant form of corporate e-mail, but Zimbra was successful in offering a better mousetrap for thousands of customers who want their messaging and collaboration in a Linux and open-source-friendly package," Levitt said.

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"Zimbra enables Yahoo to put a stake in the corporate ground with a solution that has attracted the attention of VCs, Fortune 100 IT departments, SMBs, service providers and the competition," he added.

Forrester Research analyst Erica Driver told eWEEK that Zimbra has a "fantastic Web 2.0 user interface," and said the companys assets could help Yahoo offer a Web-based collaboration alternative to Google Apps.

Should the purchase close in the fourth quarter of 2007 as expected, Zimbra, based in San Mateo, Calif., will become a wholly-owned subsidiary of Yahoo. Zimbra CEO Satish Dharmaraj will continue to lead the Zimbra team based in Yahoos Sunnyvale headquarters and will report to Garlinghouse.

Dharmaraj wrote in a blog post that Zimbra plans to continue to make its software available for download and will still offer Zimbra software and support as usual.

"Together, Yahoo and Zimbra will continue to deliver on this vision of bringing the richest, most collaborative applications to your workplace, to your school and to your homes," Dharmaraj wrote. "This is what we will set [out] to do in the coming years."

Read more here about IBMs moves in the field of Web collaboration.

The purchase is indicative of Yahoos transformation from what some industry experts perceived as an old-fashioned Internet company to one that is hewing more closely to the evolving Web as it moves from 2.0 to 3.0.

Garlinghouse incidentally helped spur this transformation with his infamous Peanut Butter Manifesto, which he sent to colleagues as a warning that the company was spreading itself too thin.

Since the manifesto was made public in November, Yahoo has reorganized its business structure and ousted CEO Terry Semel and other executives, whom many analysts claimed were resistant to changing the companys course.

Yahoo co-founder Yang stepped in and has proven fairly active and acquisitive. On Sept. 4, Yahoo agreed to buy online ad network BlueLithium for $300 million.

Check out eWEEK.coms for more on IM and other collaboration technologies.

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