VMware Sells Zimbra Amid Shift in Strategy
By WILLIAM ALDEN
Deal Book
New York Times
July 15, 2013, 11:04 am
When VMware bought Zimbra in 2010, the deal was considered integral to the company’s strategy. Three years later, it’s a different story.
VMware is selling Zimbra, a provider of corporate e-mail and collaboration software, to Telligent, which makes social software for businesses, according to an announcement on Monday. The companies plan to merge under the name Zimbra to offer a “unified social collaboration suite.”
Zimbra is to receive investments from Intel Capital, NXT Capital Venture Finance, VMware and others, the announcement said. VMware’s shares rose modestly in morning trading on Monday.
The deal, financial terms of which were not disclosed, reflects a shift in strategy for VMware, a cloud computing company. It has been selling assets this year as part of a plan announced in January, and Monday’s sale represents the completion of those divestitures.
It also underscores the broader challenges facing VMware and its industry.
VMware pioneered the business of server virtualization, helping companies make the most of their server resources. But with many servers now virtualized, the company faces a saturated market, said Mark L. Moerdler, senior research analyst at Sanford C. Bernstein.
“You have a company that is becoming less of a traditional growth story,” Mr. Moerdler said. “The core business is slowing significantly.”
VMware has been making forays into related business. Zimbra, which VMware bought from Yahoo in 2010, was seen as a ticket to e-mail- and calendar services.
But amid a broader realignment, which included a management change last year, VMware is now focusing more on what it calls a software-defined data center, in addition to other computing services.
“In order to continue focusing on these areas, we determined that the collaboration and communication features of Zimbra as a stand-alone product would be best delivered by a partner such as Telligent in order to continue enhancing the Zimbra technology platform and growing the business,” Erik Frieberg, VMware’s vice president of product marketing for end-user computing, said in a blog post on Monday.
Telligent, which is based in Dallas, emphasized the strategic advantages that the deal would confer.
“Zimbra enables traditional collaboration through features such as e-mail, calendar sharing and address books, while Telligent supports real-time collaboration via chat, social networking, online communities and more,” Patrick Brandt, Telligent’s chief executive, who will lead the new company, said in a statement. “The combination of the two will enable companies to easily share documents and ideas instantly, providing true unified collaboration.”
Zimbra has grown under VMware’s ownership, Mr. Frieberg said in the blog post. It has added a net of 2,600 new customers in its e-mail and collaboration business, expanding to more than 85 million mailboxes, the post said.
The combined company would have more than 5,000 customers and 400 partners, with offices in Dallas, Palo Alto, Calif., London, Tokyo and Pune, India, the announcement said.
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