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Zimbra goes to Yahoo! for $350 million

Yahoo! just bought Zimbra. Here's why.

Wow. Yahoo! just bought open-source email provider, Zimbra, for $350 million. For anyone who still doubts that valuations for open-source companies are rising fast and steep, Zimbra is a case study rebuttal.

[UPDATED (sounded too negative before, and I didn't meant to be.] I don't know Zimbra's revenues, but the company is on track to hit $20 million this year. (This is actually pretty impressive, given the growth it would mean over the previous year, which was $6 million.) That's one heck of a valuation.

The real question is why Yahoo! would bother buying Zimbra, when it already has an equivalent Ajax-style email solution stemming from its Oddpost acquisition. Open source? Not in this case. I don't think open source was Zimbra's strongest selling point.

Market focus? This, I think, offers more of a clue. Satish (CEO, Zimbra) talked with Dan Farber over at ZDNet and offered the following:

"It's a way to take Yahoo mail to new markets. Together with Yahoo content network our zimlets [the mechanism for integrating Zimbra with third-party systems and content as well as for creating mashups] come alive," [Satish] 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."...

The new markets are the businesses, service providers, schools, and government agencies that Zimbra serves.

I also suspect that this was a preemptive strike against Google, and a darn good one. In fact, I never would have said this before, but I think this is the right way for Yahoo! to attack new markets. Email should be the hub of everything in the enterprise. Not office productivity suites (which are really just excuses to create something that you can then email to someone else). Email. Email. Email.

I've never thought of Yahoo! as the smarter of the two, between Google and Yahoo!, but this acquisition makes me think that it just might be. Yahoo!, like Apple, groks that people gravitate toward applications that make their lives easier and more enjoyable. Apple is the king of creative productivity. Yahoo! apparently wants to be the king of collaborative productivity.

With Zimbra and Oddpost, it's on the right track and well on its way.