Yahoo to acquire email firm for $350m

Yahoo is buying email service Zimbra for $350 million in an all-cash deal that may open a new revenue channel for the slumping Internet icon, an Associated Press report said.

The Associated Press report said the acquisition represents Yahoo's second significant expenditure this month as co-founder Jerry Yang spearheads an effort to breathe new life into the Sunnyvale-based company.

Two weeks ago, Yahoo disclosed plans to buy an Internet direct marketing network, BlueLithium, for $300 million. That purchase marks another step in Yahoo's attempt to sell more advertising on other web sites besides its own, hoping to boost its sagging profits.

With the Zimbra purchase, Yahoo appears poised to branch in a new direction that may intensify the company's already fierce competition with rivals Microsoft and Google, the Associated Press report said.

Zimbra specializes in selling email software and hosting services to businesses, universities and Internet service providers.

Zimbra's customers include one of the largest Internet service providers, Comcast , as well as several well-known companies, including H&R Block and Raytheon, and prominent schools like UCLA and Georgia Tech. For the most part, though, Ferris said Zimbra has had trouble getting companies to buy its hosted email service.

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