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As reported today, Yahoo! continued the recent frenzy of acquisitions by purchasing Zimbra, a popular maker of an email and calendar suite, for a cool $350 million in cash. This seems to be capping off a flurry of activity by interim Yahoo! CEO Jerry Yang who took over after the departure of Terry Semel.

This is a very, very smart acquisition in my opinion. Yahoo! currently is heavily invested in the e-mail space, with the Yahoo! mail system counting over 250 million users worldwide. I imagine the purchase will allow Yahoo! to leverage much of Zimbra’s excellent email, calendar and collaboration technology, already popular among it’s educational and corporate clients.

This purchase is setting up what will turn out to be a bloody battle of the desktop and the home page:

  • Google’s much-loved Gmail faces off with both Yahoo’s much-improved new web-email offering and Microsoft’s Hotmail product. As the web-based email reaches new levels of usability, Microsoft Outlook, the king of corporate email, suddenly doesn’t look so invincible.
  • Google Apps is a direct shot at Microsoft Office, and Zimbra’s collaboration and calendar tools look to be heading the same direction.
  • Google’s domination of the search market hardly looks in doubt, but Yahoo! and MSN are throwing major resources towards winning back the almighty advertising dollar, with purchases of aQuantive and Right Media just a few months ago.

One of the biggest questions will be whether or not web-based software such as Google Apps, Yahoo! Mail and Gmail, can become functionally capable enough to actually start taking market share from Microsoft Office. They have come a long way to be sure, but as cool as I think Google Apps is, and as much as I hate shelling out for dozens of copies of Office each year it seems, there is no way in the foreseeable future that even an open-minded, web-loving company like Wpromote will take that plunge.

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