Kara Swisher

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As BoomTown Said: VMware Buys Zimbra From Yahoo (Plus the Full Press Release)


As BoomTown previously reported, VMware officially confirmed today that it is buying Yahoo’s Zimbra open-source email unit.

Financial terms were not disclosed, but sources said the price was well below the $350 million Yahoo (YHOO) paid for the start-up in late 2007.

Sources also said there is a large employee-retention element to the sale to encourage Zimbra’s 110 employees to make the move to VMware (VMW).

Under terms of the deal, which has been brewing between the two Silicon Valley companies for some weeks, VMware said it will “purchase all Zimbra technology and intellectual property. Yahoo! will have the right to continue to utilize the Zimbra technology in its communications services, including Yahoo! Mail and Yahoo! Calendar.”

“We’ve been simplifying the data center,” said Brian Byun, vice president and general manager, cloud services, at VMware, in an interview with me this afternoon. “With this move, we are expanding to another area…which is part of a larger strategy.”

Said Jim Morrisroe, who has been running Zimbra for Yahoo: “This is another step in a mission we’ve been on at Zimbra and we are very excited about what’s next at VMware.”

A week ago, BoomTown reported that the sale of Zimbra was likely.

BoomTown had reported in late September that Zimbra was for sale by Yahoo, which has been targeting for “de-acquisition” assets that are not central to the strategies of the company’s new management.

Zimbra and Yahoo’s small business and jobs sites have been on the block.

One source I spoke to last week noted that the reason VMware was interested in nabbing Zimbra is that its execs want to expand “up the stack” from the software company’s position in virtualization.

And Yahoo is no longer interested in running Zimbra’s white-label, open-source email commercial product, which serves the university and ISP markets. There, its main rival has been Google (GOOG).

VMware said the acquisition is expected to close in the first calendar quarter of 2010.

VMware to Acquire Zimbra

Company Expands vCloud Portfolio with Next Generation Email and Collaboration Software

PALO ALTO, Calif., January 12, 2010–VMware, Inc. (NYSE: VMW), the global leader in virtualization solutions from the desktop through the datacenter and to the cloud, today announced that it has entered into a definitive agreement to acquire Zimbra, a leading vendor of email and collaboration software, from Yahoo! Inc.

This acquisition will further VMware’s mission of taking complexity out of the datacenter, desktop, application development and core IT services, and delivering a fundamentally more efficient and new approach to IT.

Zimbra is a leading open source email and collaboration solution with over 55 million mailboxes. As an independent Yahoo! product division, Zimbra achieved 2009 mailbox growth of 86% overall and 165% among small and medium business customers.

Based on a modern, flexible architecture designed for virtualization and cloud-scale infrastructure, the Zimbra technology provides substantially lower total cost of ownership than traditional solutions. Zimbra products offer a full enterprise feature set, excellent interoperability with legacy email environments and have been deployed across small and large environments; as on-premise software at thousands of small and medium businesses, distributed enterprises, and as a hosted service at major service providers such as Comcast and NTT Communications.

“Over the coming years, we expect more organizations, especially small and medium size businesses, to increasingly buy core IT solutions that deliver cloud-like simplicity in end-user and operational experience,” said Brian Byun, Vice President and General Manager, Cloud Services, VMware. “Zimbra is a great example of the type of scalable ‘cloud era’ solutions that can span smaller, on-premise implementations to the cloud. It will be a building block in an expanding portfolio of solutions that can be offered as a virtual appliance or by a cloud service provider. We are excited to welcome the Zimbra team and community to the VMware family.”

VMware plans to support existing Zimbra products and open source efforts while further optimizing Zimbra products for vSphere-based cloud infrastructure, alongside Microsoft, IBM and other messaging and collaboration solutions.

Under the terms of the agreement, VMware will purchase all Zimbra technology and intellectual property. Yahoo! will have the right to continue to utilize the Zimbra technology in its communications services, including Yahoo! Mail and Yahoo! Calendar.

“The Zimbra technology has played and will continue to play an important role in our communications services products. The technology is core to Yahoo! Mail and Yahoo! Calendar and a key differentiator for these leading products,” said Bryan Lamkin, senior vice president, Yahoo! “The customers and partners of Zimbra’s industry-leading product and successful enterprise business will be well served with VMware.”

The acquisition is expected to close in the first calendar quarter of 2010. Financial details of the transaction were not disclosed.

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I think the NSA has a job to do and we need the NSA. But as (physicist) Robert Oppenheimer said, “When you see something that is technically sweet, you go ahead and do it and argue about what to do about it only after you’ve had your technical success. That is the way it was with the atomic bomb.”

— Phil Zimmerman, PGP inventor and Silent Circle co-founder, in an interview with Om Malik