Yahoo Buys Zimbra - $350m in Cash Sets High Valuation for Office 2.0 Apps
Zimbra quickly made a name for itself in 2005 in the nascent Office 2.0 market with an aggressive AJAX-based strategy. It's online email/collaboration application has managed to gain more than 9m mailboxes.
Yahoo's ambitions to compete with Google Apps are strengthened by this acquisition. For Zimbra, it provides a partner with scale.
The biggest challenge for Office 2.0 companies is being able to convince enterprises that they have the computing resources to scale to absorb large numbers of users. Yahoo will provide that checkbox when corporations compare rival offerings.
The valuation of Zimbra will be welcomed by other Office 2.0 companies as they claim "validation" for their businesses. But this deal won't boost the fortunes of Office 2.0 companies.
Since scale is so important in this market, look for Office 2.0 companies rushing to find dance partners that can offer robust computing platforms, such as the Telco/Cable companies.
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