VMware has entered into an agreement with Yahoo to acquire Zimbra. Although the actual financial details of this acquisition have not been made public, it is rather unlikely that Yahoo was able to recover the $350 million paid for the open source collaborative application company. My colleague Larry Dignan has also addressed this in his post VMware on the Zimbra purchase: A building block for cloud lineup.
How VMware describes this move
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.
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.
Snapshot analysisHaving used the Zimbra collaborative system, I can see that VMware has its work cut out for it in the areas of improving customer service, fixing problems with the software and compatibility with a number of important client systems (see my post Saying goodbye to Zimbra for more information.) While Yahoo didn't appear to have the focus or the resources to address these issues, VMware clearly does. Organizations who have selected Zimbra are likely to be happy about this industry event.
As my colleagues Jay Lyman, China Martens pointed out in their report,VMware grows cloud stack, sends message with Zimbra buy, VMware is clearly making moves to move beyond virtual machine software, virtual access software, application virtualization software, management software for virtual environments, workload management for virtual servers and virtual clients into the development of a complete cloud computing environment.
This, of course, means that the company will be moving into a direct competition with other cloud computing providers, such as Amazon, Microsoft and Rackspace. VMware appears to also be targeting Citrix's ecosystem.
If this acquistion is considered along side the earlier acqusition of Springsource, VMware is also moving to more directly compete with suppliers of system software and application environments including IBM, Novell, Oracle, Red Hat and others.
Over all, this could be considered a very good move by VMware. It is likely that this technology was acquired at fire-sale pricing and can be used as the foundation for quite a number of value added products and services.