Acquisition instantly makes search company a major provider of Web-hosted collaboration and communications…
Yahoo has been on an acquisition binge late, but mostly to expand its advertising business. Now Yahoo is buying its way deeper into the applications business with the acquisition of Zimbra for a reported $350 million, mostly in cash.
San Francisco — Yahoo Inc said on Monday it would pay about $350 million for Zimbra Inc., a privately held company whose Web-hosted collaboration and messaging suite is considered a successful example of the SaaS (software as a service) model, which competes directly with products from Microsoft Corp. and Google Inc.
The deal will help Yahoo leverage its popular Yahoo Mail service as the company struggles to compete with Internet giant Google and social network sites such as MySpace and Facebook.
Executives of both companies said in an interview the cash and stock deal would allow Yahoo to offer new e-mail services to universities, businesses and consumers via Internet service providers like Yahoo e-mail customers AT&T or BT.
“With Zimbra, Yahoo becomes a competitor to Google, Zoho, Cisco’s WebEx, and others that provide Web-hosted collaboration and communication suites.”
Zimbra, like other Web-hosted suite providers, is also considered a rival to Microsoft’s Microsoft Office suite and Exchange messaging platform.
“Zimbra developed a leading edge, Web 2.0 open source messaging and collaboration software suite, with email, calendar, document processing and a spreadsheet.”
“Zimbra will enhance its decade-old Yahoo Mail, the world’s largest consumer e-mail service with 250 million accounts.”
In addition to e-mail, Zimbra’s suite also includes calendar and contact management components, as well as an open platform that allows third-party developers to create mini-applications called Zimlets for the suite.
Zimbra software, which also includes a program for managing contact details, runs on the Web but offers a level of user control previously only found in desktop computer software.
The Yahoo executive in charge of the deal said he was particularly impressed by Zimbra’s advanced calendar features.
“We view this acquisition as furthering our leadership in an area where we have been a category leader,” said Brad Garlinghouse, senior vice president of communications and communities at Yahoo.
Zimbra competes with Google’s Gmail in the higher-education and business market where the start-up company’s focus on features desired by big business and the flexibility of its technology gives it advantages over consumer-focused Gmail.
Zimbra markets an email platform that combines an open source client with proprietary server components.
The client is essentially an advanced version of Outlook that runs inside a browser. It automatically turns street addresses into a link to the appropriate Yahoo Maps page. Similarly, phone numbers inside a message can be dialed with a single click. Some of the impressive features are:
- Selecting an address in a Zimbra email can pop up a Yahoo map of the location
- Zimbra allows spreadsheet data to be included in documents and messages
- Zimbra supports a variety of business mashups, such as popping up a purchase order within an email
“The first time I saw Zimbra I was wowed,” said Garlinghouse, who was present at the product demonstration, which has become something of a local legend. Merger discussions with Zimbra picked up early this summer, he said.
In the six quarters since Zimbra started shipping its suite of collaboration software tools, the company has signed up 1,300 organizations serving 9 million e-mail customers, said Satish Dharmaraj, Zimbra’s co-founder and chief executive.
“It is a way to take Yahoo mail to new markets. Together wtih Yahoo content network our zimlets [the mechanism for integrating Zimbra with third-party systems and content as well as for creating mashups] come alive,” Dharmaraj said. “The Yahoo consumer email will continue as is. We may augment Yahoo Mail with our calendaring and with Zimlets, but right now the goal is to reach new markets.”
Zimbra has a browser-based client and supports Windows, Apple, and Linux desktops, as well as Microsoft Outlook and a variety of mobile devices. On the server side, Zimbra supports Red Hat, Mac, Ubuntu, SUSE and Fedora.
“Version 5.0 is coming out as planned and our roadmap is unchanged. Our unit will just be focused on delivering those platforms to those markets,” Dharmaraj added.
Companies and institutions looking to run a customized version of the client are charged for support as well as advanced features in the server software.
Zimbra recently landed a major deal to provide email service to subscribers of Comcast, the largest U.S. cable operator. Under the agreement, Zimbra could also provide visual voicemail services and calendar function tied to television schedules and on-demand content. Yahoo already has a deal to provide display advertising for Comcast.
The new markets are the businesses, service providers, schools, and government agencies that Zimbra serves. Currently, Zimbra has 9 million mailboxes across different segments. Pricing is $1 for students, $8 for faculty, and $3 for ISPs and $28 per user per year for businesses, Dharmaraj said.
“There are great synergies and opportunities from the backend. We have invested heavily in anti-spam. We are impressed with the storage and scalability Zimbra has achieved, but we have it on a much larger scale. For example, we do mailbox search in sub-milliseconds,” Garlinghouse said. “We get an awesome team and set of technology that extend something we are already world class at doing to new segments. Every week I get calls from colleges, for example. With Zimbra we can answer those calls.
Yahoo touted the acquisition as a way to expand its presence in the professional email outsourcing market.
Google has been aggressively targeting that same market with its Google Apps for your domain service, which allows organizations to host their email and other services on Google’s platform.
Yahoo Mail is the largest provider of online email services with about 250m subscribers. The internet portal also offers premium email service targeted at small businesses but previously lacked an offering for large organizations.
Buying Zimbra will allow Yahoo to build on its strength in email. It has 250 million users on email to rival Google’s approximately 50 million. Yahoo also recently released a well-received new version of Yahoo Mail that lets users send instant messages within the email program and send text messages to mobile phones.
Garlinghouse said it was just the latest acquisition his company has made to become the preferred Internet media partner for other industries, building on deals with eBay Inc., Comcast and a newspaper consortium. Recent Yahoo acquisitions include advertising companies Right Media and BlueLithium.
The closely held company, based in San Mateo, California, made a splash two years ago at a Web 2.0 conference in San Francisco by demonstrating a new generation of Web-based e-mail that could be made to look and act like Microsoft Outlook.
Zimbra co-founder and CEO Satish Dharmaraj will continue to lead the Zimbra team, which will retain CTO Scott Dietzen and co-founders Ross Dargahi and Roland Schemers.
After the deal closes, expected in four to six weeks, Zimbra will become a wholly owned unit of Yahoo. Dharmaraj will lead Zimbra’s nearly 100-employee team from Yahoo headquarters in Sunnyvale, California, reporting to Garlinghouse.
Preview Zimbra 4.5 screen shots at: http://content.zdnet.com/2346-10741_22-64584-1.html