Yahoo has decided to pay $350 million for Zimbra, a web-based email product serving more than 1,300 organizations including universities, ISPs, and SMBs. This will add to Yahoo’s already existing 250 million personal email accounts. Zimbra has 9 million ($39 per email account) paying email accounts and offers group calendars and other doc sharing apps. Companies pay about $28 annually per user, though universities and ISPs benefit from steep discounts. Yahoo plans to offer to host the email services on its own servers and could possible offer a free version in return for the right to display ads. The 100 person company was founded in 2003 and raised $30.5 million.
Our quick math tells us that assuming that the $28 user fee drops to about $3 per user given the steep discounts given to universities and ISPs (the majority of its customers we assume), Zimbra would generate about $30 million annually. Hence, Yahoo paid a steep 12x revenues for this acquisition. No word on profits. This is more of a strategic move for Yahoo as it gears up to compete with Google and now apparently with Microsoft, as it can easily leverage this product to build a suite of Yahoo branded web based applications.
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