Exclusive: VMware Likely to Buy Zimbra from Yahoo
Yahoo is close to selling its Zimbra unit to VMware, according to several sources close to the situation. — Sources said the deal could be announced soon, but the price for the open-source email unit was still unclear.
Context & Ripple Effects
Yahoo bought Zimbra in September 2007 as a bet on open-source email and calendaring for its mail ambitions — a move contemporaneous coverage questioned at the time (why did Yahoo buy them?). Two-plus years on, BoomTown reports Yahoo is close to selling the same unit to VMware, with the price still unclear and announcement possible soon.
The reported sale fits a stretch of Yahoo narrowing its footprint: deepening ties to platforms like [[entity:yahoo|Facebook Connect integration]], rebranding Flickr under the Yahoo logo, and trimming ad products around parked domains. For VMware, the deal would be an unusual step beyond virtualization infrastructure into a hosted/collaboration application business.
First-order effects
- Zimbra's customers, partners, and engineering team shift from a consumer portal under retrenchment to a virtualization vendor whose strategic intent for an email product is unannounced — pricing and roadmap clarity is the immediate open question since the reported deal value is still unsettled.
Second-order effects
- Yahoo converts a 2007 acquisition into cash it can point at core search, ads, and social properties, continuing the pruning signaled by its late-2009 product decisions.
- VMware takes on an open-source collaboration product outside its installed base, forcing it to either build a sales motion for enterprise email or position Zimbra as an attach to existing virtualization customers.
Third-order effects
- If the pattern holds, first-wave Web 2.0 acquisitions made by portals at peak optimism get recycled to infrastructure vendors assembling broader software stacks — with the risk that assets bought for one strategy underperform inside a second buyer with different goals.
The trend: Virtualization vendors are broadening into application-layer software at the same moment their large internet-acquirer peers are pruning the acquisitions of the 2007-era buying spree.