Does VMware buying Zimbra from Yahoo make sense?

We don't know for certain that VMware, the giant proprietary virtualization company, is buying Zimbra, the open-source e-mail server company, from Yahoo -- that's just the news from the rumor mill. But it's not just any rumor: Kara Swisher, a columnist at the Wall Street Journal and one of the most respected technology reporters around, broke the story when she wrote that Yahoo was close to selling Zimbra to VMware. Since then other sources, including some of my own, have confirmed that the deal is close to happening.

The question we don't need to ask is, "Why is Yahoo trying to sell Zimbra?" If you follow Yahoo you know why that is. Yahoo needs cash for its disgruntled stockholders who still aren't happy that Microsoft didn't buy them out.

Besides, as Swisher reported earlier this year, Zimbra isn't a good fit with Yahoo's attempt to refocus on the consumer market. Zimbra is an excellent business e-mail and groupware server. Zimbra isn't meant to be an end-user program though; it's meant to be a drop-in replacement for Microsoft Exchange.

I might add that even when Yahoo bought Zimbra for $350 million in 2007, the company didn't seem to have a clue as to how they were going to integrate it into Yahoo's other offerings. As a result, from the outside looking in, Zimbra has always appears to be an ugly duckling in the Yahoo flock.

We know why Yahoo is selling Zimbra, so the real question is, why are they selling it to VMware, of all companies? Why not Red Hat, which might be able to use an open-source e-mail server to go with its RHEL (Red Hat Enterprise Linux) server offering? I can't say for certain, but it seems other companies weren't that interested in Zimbra. Thus, according to Swisher, Yahoo CEO Carol Bartz approached VMware CEO Paul Maritz to see if the virtualization titan might want to buy it at a low price. It looks likes they do.

While the two have known each other for years, I'm sure Maritz isn't considering the purchase as a personal favor. Instead, I think VMware has seen the writing on the wall that virtualization alone isn't going to be enough to keep the big bucks rolling in.

As I said back in February 2009, VMware has enemies coming at its core virtualization business from all directions. From one flank, Microsoft is coming after them with Hyper-V on the server and has XP virtualization baked in Windows 7. On the other flank, Red Hat is taking them on with KVM both on the server and on the Linux desktop. And, from the rear, Novell and Citrix are both using XenServer to try to wrestle the server virtualization market from VMware.

What's a company to do? Diversify its offerings while sticking with its enterprise market. Specifically, I see VMware using Zimbra as part of its recently announced private cloud, all-in-one enterprise service product. VMware, along with parent company EMC, and Cisco formed the VCE (Virtual Computing Environment) coalition in November. Its purpose: to offer enterprise customers a tightly integrated, hardware and software bundle with a single throat to choke for service. Throwing in a reliable e-mail/groupware server into the mix will, VMware hopes, make the package more interesting to business customers.

Of course, Microsoft won't like this. But VMware hasn't been on good terms with Microsoft for years. Remember, back in 2008, how VMware executive said that in ten years, Windows would be obsolete. Consider the purchase of Zimbra combined with placing it in VCE as two steps towards making that happen, and I think you'll know why VMware is willing to buy Zimbra.

Copyright © 2010 IDG Communications, Inc.

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