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San Francisco (IDGNS) - Yahoo has agreed to buy Zimbra, a privately held company whose Web-hosted collaboration and messaging suite is considered a successful example of the SaaS (software as a service) model.

[ Plus:Web apps threaten MS Office | Talkback: Look out, Google? ]

Yahoo will acquire Zimbra for $350 million in a transaction expected to close in this year's fourth quarter, the companies said Monday.

With Zimbra, Yahoo becomes a competitor to Google, Zoho, Cisco's WebEx, and others that provide Web-hosted collaboration and communication suites.

Zimbra, like other Web-hosted suite providers, is also considered a rival to Microsoft's Microsoft Office suite and Exchange messaging platform.

Yahoo is buying Zimbra in part to boost the Yahoo Mail Webmail service and leverage Zimbra's client base in universities, small and medium-size businesses, and ISPs, Yahoo said.

In addition to e-mail, Zimbra's suite also includes calendar and contact management components, as well as an open platform that allows third-party developers to create mini-applications called Zimlets for the suite.

Zimbra customer Peter Gilbert is ambivalent about the news. “Yahoo had their heyday, and I've gotten the impression they're on their way out and they're just grasping for straws and buying left and right in the hopes that they can come back,” he said.

For Gilbert, an independent IT consultant in New York whose one-man company is called PG Systems, the best case scenario would be that Zimbra gets more resources to continue to innovate and develop its technology while Yahoo keeps its distance and doesn't interfere too much.

“Yahoo is too big and commercialized. Zimbra gave me that underdog, rebel kind of feeling,” said Gilbert, who uses Zimbra for his work and has recommended it to clients.

Gilbert once used Yahoo Mail for work, but wasn't satisfied, particularly because, in his experience at the time, spam filters would often trap his messages simply because they came from a Yahoo.com address.

Prior to adopting Zimbra, he also used a shared hosted Exchange server, but he finds that the hosted Zimbra suite gives him more for his money, such as a hosted document repository and a centralized contacts manager.

It remains to be seen how committed Yahoo is to continue investing in Zimbra's technology, although it sounds like Yahoo is serious about its commitment to Zimbra, said Rebecca Wettemann, an analyst with Nucleus Research.

“Yahoo is taking advantage of the innovation and nimbleness of a small company, and what it needs to do is continue to drive that innovation in the Zimbra product while embracing it into the organization,” Wettemann said.

In a question-and-answer Web page about the Yahoo deal, Zimbra said existing customers will not be affected.

Zimbra co-founder and CEO Satish Dharmaraj will continue to lead the Zimbra team, which will retain CTO Scott Dietzen and co-founders Ross Dargahi and Roland Schemers.

Zimbra has several different editions of its suite, which can be installed in-house as server software or accessed as a service from Zimbra hosting partners.

Zimbra pricing varies by edition, size of deployment and optional components. The company has about 100 employees and a customer base of more than 9 million paid mailboxes in more than 50 countries.

After the deal closes, Zimbra will become a Yahoo subsidiary.

This story was updated on September 17, 2007

San Francisco (IDGNS) -

San Francisco (IDGNS) - Google's YouTube division has launched what it hopes will be an unobtrusive way for companies to advertise on videos hosted at its popular Web site.

The ads show up briefly as an overlay on the bottom 20 percent of the video, and people can click and watch the advertisement if they want to. YouTube will share revenue from the advertising with content owners, it said in a blog posting Wednesday.

The ads can be targeted by geography, and the examples offered by YouTube on Wednesday were visible from PCs in the U.S., but not from Europe or Asia.

The examples include the Crime Mob - Rock Yo Hips video, which shows a Warner Album Browser ad; and the Madina Lake - House of Cards video, which shows an ad for “The Simpsons.”

YouTube said it began testing its “InVideo” ads weeks ago and that they are designed to interfere as little as possible with viewing. If a user clicks on the advertisement, the video they were watching pauses while the ad plays. “If you choose not to click on the overlay, it will simply disappear,” the company said.

YouTube is only placing ads on content from “select partners,” although it said both media companies and individual users will be able to earn ad revenue from their content.

YouTube asks site viewers to send suggestions on the new system, but the company apparently wants to keep feedback private. Comments are disabled for the ad blog posting, but users can send an e-mail by clicking where it says “The YouTube Team” at the bottom of the posting.

(James Niccolai in Paris contributed to this report.)

San Francisco (IDGNS) - Amid increasing competition in a fickle cell phone market, Motorola expects to report a loss for its mobile devices business in 2007 and now estimates that second quarter sales will be lower than expected.

The number two handset maker said on Wednesday that second quarter sales for the company would be $8.6 billion to $8.7 billion, instead of $9.4 billion as previously expected.

That drop in expected sales is the result of lower handset sales, particularly in Asia and Europe, Motorola said. In the second quarter, Motorola expects to report sales of 35 million to 36 million handsets. That will lead to a larger operating loss for the mobile device business in the second quarter compared to the first quarter, it said.

During the first quarter, Motorola sold 45.5 million phones. At the time, the company said it foresaw a gradual recovery of its mobile phone business throughout the rest of the year with expectations of a profitable year.

Motorola now expects a second quarter generally accepted accounting principles loss per share in the range of $0.02 to $0.04.

The company will announce its earnings for the second quarter 2007 on July 19 and will offer further details then, it said.

Motorola also announced that it named a new president for the mobile division: Stu Reed, formerly executive vice president of integrated supply chain for Motorola. Reed's predecessor, Ron Garriques, left the company in February to head up Dell's global consumer division.

Prior to its first quarter earnings report, Motorola also had to warn that sales would be lower than expected. It made some executive changes then, including the appointment of a new president. Earlier in the year, Motorola had implemented a new plan to help it improve profitability, but that plan wasn't working out, the company said during the first quarter earnings warning.

Most of the large handset makers are struggling to keep profits up as sales in established markets like Europe stagnate as most people there already have phones. The companies are increasingly branching out into emerging markets, such as India and China, but they must sell their phones at lower prices to win customers there. That's squeezing profit margins.”The only real growth is at the low end, which means there's nice unit growth, but the dollar growth is not there,” said Will Strauss, an analyst with Forward Concepts.

“This year is a soft year for the cell phone market, in spite of Apple,” he said. Apple's hugely hyped iPhone is expected to sell around 10 million units through next year, which may sound like a lot. But this number is dwarfed by the approximately 150 million units that companies like Nokia sell in a year, Strauss said.

The iPhone isn't affecting the sales of the biggest cell phone companies, but it may help companies like Motorola realize what they need to do to improve their prospects, he said. The only way that the mobile phone companies can grow profits in saturated markets is to “convince everybody that they need a new cell phone with new bells and whistles,” Strauss said. “The iPhone is raising awareness of what the future cell phones are going to look like.”

In addition, Motorola is notorious for producing hit phones, like the Razr, that sell well but then failing to follow up with additional models that continue the momentum. “They rode too long on the Razr,” Strauss said.

But the handset maker could get a boost later in the year when it starts selling the Razr 2, which Avi Greengart, an analyst at Current Analysis, said is a big improvement on the first version. Motorola is likely to learn from its mistakes the first time around too. “In the past, they really let the original Razr run away with volume as opposed to maintaining it as a premium fashion phone,” he said. “I think this time they're going to resist the rapid price drop.”

This story was updated on July 11, 2007.

San Francisco (IDGNS) - Google has agreed to buy messaging security company Postini for $625 million, a move intended to increase the appeal of Google's hosted software applications among big businesses, the companies announced Monday.

Postini provides on-demand security, archiving and policy enforcement services, primarily for e-mail and instant messaging systems, to about 35,000 business customers worldwide. Google will use the technology to boost the security and compliance features of Google Apps, its hosted suite of productivity software.

Around 1,000 businesses are signing up for Google Apps each day, according to Google. But the company admitted that big businesses have been reluctant to use hosted services because of concerns about security and corporate compliance issues. It hopes that buying Postini will help relieve those concerns.

Google Apps customers will be able to use Postini services for tasks like scanning and encrypting e-mail, and archiving messages for compliance and legal purposes, said Dave Girouard, vice president and general manager for Google's enterprise business, in a conference call.

The cash deal is expected to close by the end of the third quarter, he said. Google will make Postini a wholly owned subsidiary and continue to support its customers and invest in Postini's products, the company said.

The acquisition will take Google a step deeper into the enterprise IT market and increase its rivalry with Microsoft, whose Office applications are a mainstay among businesses today. Google launched the Premier Edition of Google Apps in February, priced at $50 per user, including service-level guarantees and around-the-clock support.

Proponents say such hosted services reduce costs for businesses because they don't need to patch and upgrade software in-house or buy dedicated hardware on which to run it. But critics point to concerns about the security and availability of hosted services, and the inability to access information when users are offline.

Google Apps ran into problems in March when early customers complained that Google wasn't meeting service availability agreements. Girouard said those problems have been resolved. “We've had a very good record overall and we're always looking at our infrastructure and our processes to avoid or minimize outages,” he said. “There will always be more we can do.”

One of the first things potential customers ask about is offline access to applications, he said. The search giant expects to use Google Gears, a browser extension it released in May for viewing Web pages offline, to address the problem in Google Apps, according to Girouard. “It's certainly an objection today and it's something that we're addressing,” he said.

The company will likely add new applications to its suite in the future, Girouard suggested. Asked what additional back-office functionality the company needs, he answered, “As the set of applications in Google Apps grows out over time, there may well be more back-office functionality that we require.”

Google Apps includes e-mail, calendaring, instant messaging, word processing and spreadsheet applications. The company is currently offering a free, 30-day trial offer for the paid Premier Edition.

Postini, with headquarters in San Carlos, California, was founded in 1999. It is a privately-held company and has been profitable since 2004. Executives on the call stressed cultural similarities between the two California-based companies and their shared goal of delivering software as services.

The merger will “fundamentally accelerate the adoption of software as a service,” Scott Petry, Postini's co-founder and chief technology officer, said on the call.

San Francisco (IDGNS) - More than a month after Symantec Corp. knocked out 50,000 Chinese PCs with a bad software update, the company is ready to offer compensation. But Chinese users eligible for the offer have to act fast; it's only good for a couple of weeks.

Symantec's problems in China began on May 18, when it released a bad software update that caused its Norton antivirus software to wrongly identify two system files in the Simplified Chinese version of Windows XP as malware and quarantine them. That mistake, which Symantec blamed on “an automated process,” left tens of thousands of PCs crippled and Internet bulletin boards full of angry posts.

Chinese users who lost data because of Symantec's faulty update demanded compensation, and at least two lawsuits were filed against the company. But Symantec was slow to respond, saying earlier this month it was considering requests for compensation.

After five weeks, Symantec is ready to make amends. The company is offering affected Chinese consumers a 12-month Norton license extension and a copy of Norton Save & Restore 2.0. Corporate customers are being offered Symantec Ghost Solution Suite licenses, depending on the number of PCs affected. Symantec is not offering to extend Norton licenses for corporate customers affected by the bad update.

Symantec described its offer as “a gesture of our goodwill.”

Chinese users will have to move fast if they want to take Symantec up on the deal. The company is only accepting applications for compensation during a brief window of time: from June 27 to July 15. The company didn't say why the period is so short, but said it was a sufficient span of time.

“We are offering more than two weeks for the registration period which we believe is a reasonable period of time for customers to register,” said Catriona Turner, a Symantec spokeswoman in Australia, in an e-mail response to questions. “If there are legitimate reasons why a particular customer is unable to register by July 15, we will give consideration to extending the date for that customer.”

Turner said the terms and conditions of the compensation offer did not require users to forego the right to legal action over damage caused to their systems by Symantec's update. “We hope that our customers will recognize that we are offering this goodwill gesture in recognition of any inconvenience caused by this incident,” she said.

Users who want to take Symantec up on its offer must apply at a special Web site , which will validate their copies of Norton Antivirus to make sure they are licensed copies and eligible for the offer.

“Customers will be asked to complete a series of questions during the validation process to help us ascertain that the customer was genuinely impacted,” Turner said.

San Francisco (IDGNS) - eBay will once again advertise on Google's U.S. AdWords network, but its spending on it will be significantly lower.

eBay will start turning on its U.S. AdWords ads on Friday, ending a 10-day pullout that made headlines worldwide and was seen as a sign of the companies' deteriorating relationship.

eBay has determined that it doesn't need to spend as much as it did before the ad blackout, eBay spokesman Hani Durzy said Friday.

“In general, our AdWords spending will be significantly lower than it was before,” Durzy said, declining to be more specific.

eBay reallocated its U.S. AdWords budget to other advertising channels and found that it isn't as dependent on AdWords as it thought before doing this test, Durzy said.

By spending part of its AdWords budget elsewhere from now on, eBay will obtain better value in terms of traffic to its marketplace, he said, adding that the AdWords blackout was never intended to be permanent.

“We can confirm that eBay is buying keywords through AdWords,” a Google spokesman. “Over the last seven years, we have worked closely with eBay to drive customers to their site and build value for their business and the business of their sellers. We look forward to a continued partnership.”

Interestingly, during the first week of the Google ad pullout, eBay's traffic actually rose slightly about 0.9 percent, a Hitwise spokesman said on Friday.

During this time, eBay drew about 9.9 percent of its visitors from Google, compared with 10.7 percent the previous week, according to the spokesman from Hitwise, a Web traffic monitoring company.

It's not clear whether the new budget reduction will affect eBay's position as the largest advertiser on Google's U.S. AdWords paid search network.

In this year's first quarter, eBay placed 67 percent of its total sponsored search link impressions, 8.62 billion, on the Google U.S. ad platform, according to Nielsen/NetRatings.

As such, eBay generated 3.8 percent of Google's U.S. sponsored search link impressions, the largest percentage of any advertiser during the quarter, according to a Nielsen/NetRatings spokeswoman.

eBay shocked the Internet industry when it pulled its ads off of the U.S. AdWords network early last week. eBay is the largest paid search advertiser in the U.S., and Google is the country's largest paid search ad network.

In March, eBay ranked first in the U.S. among paid search advertisers with 802 million sponsored link exposures, or 4.1 percent of the total, according to comScore Networks. Its position is even stronger if one factors in eBay's comparison shopping engine, Shopping.com, which ranked third on that list with 357 million sponsored link exposures, or 1.8 percent of the total.

Meanwhile, Google topped the list of search engine referrers, handling 57.3 percent of all paid search ad clickthroughs, comScore said. Yahoo took a distant second place with 26.1 percent of clickthroughs.

At the time of the ad pullout, eBay characterized the move as a regular “experiment” similar in nature to tests it runs regularly to determine the best mix for its advertising spending.

Yet, a source told IDG News Service that the move was an angry reaction to Google's plan to throw a party in Boston last week to attract eBay merchants who would be in town to attend the eBay Live annual seller conference.

Apparently, eBay's top brass took exception to Google's party, whose purpose was protesting eBay's decision to forbid merchants in its marketplace from using Google's Checkout online transaction system.

After eBay turned off the ads, Google cancelled the party, but eBay kept the ad blackout in place until today, when it will be lifted.

Google and eBay have increasingly become competitors in areas like online payments, where Checkout and eBay's PayPal compete, and product listings.

eBay's decision to switch off its U.S. AdWords campaigns didn't sit well with many eBay merchants who felt that the move would ultimately affect them more than it would affect eBay.

“It has definitely had a negative effect on our business,” said Jonathan Kuhlmann on Thursday, before eBay announced it was reinstating the ads.

Kuhlmann is the founder of eBay footwear store Grapevine Hill, which has Titanium PowerSeller status, meaning it generates average monthly sales of at least $150,000.

“We're very concerned about it,” he said.

This story was updated on June 22, 2007

San Francisco (IDGNS) -

San Francisco (InfoWorld) - Internet based phone company Vonage says a ruling by the

U.S. Supreme Court this week has given it new life in a crippling lawsuit with telecommunications giant Verizon.

Vonage asked the U.S. Court of Appeals in Washington D.C. on Tuesday to vacate and remand a U.S. District Court's judgement and injunction against it in a patent dispute with Verizon.

“Vonage has asked the appeals court to send the decision back to the lower court to retry the invalidity case based on the Supreme Court's disavowal of previous rigid standards for determining when an invention is obvious to warrant patent protection,” Vonage said in a statement in response to requests from InfoWorld for comment on the ruling.

On Monday, the U.S. Supreme Court ruled unanimously in favor of more stringent standards for granting new patents in a case brought by KDR International, a Canadian manufacturer, against Teleflex, which held a patent for a kind of automobile throttle control.

The ruling was widely seen as a rebuke from the high court to patent-friendly rulings from lower court that made it hard to reject new patent applications on the grounds that they were merely “obvious” combinations of existing technology.

Vonage said it was pleased with the high court's decision, which it said mean that “the obviousness question should not be determined in a narrow, rigid manner that denies common knowledge, but rather should incorporate a more expansive and flexible approach that allows for consideration of common sense when assessing whether an invention is ordinary or obvious, and thus ineligible for patent protection.”

“Vonage is confident this ruling should have a positive impact on its case,” the company said.

In particular, Vonage argued in its brief on Tuesday that the validity of Verizon’s name translation ('574 and '711) and wireless ('880) patents should be retried by the U.S. District Court in light of the U.S. Supreme Court's April 30, 2007 decision.

“We are very encouraged by the Supreme Court’s decision and the giant step it represents toward achieving much-needed patent reform in this country,” said Jeffrey Citron, Vonage chairman and interim chief executive officer. “The Supreme Court's decision should have positive implications for Vonage and our pending patent litigation with Verizon. We are also hopeful that this case will protect legitimate innovators and the value of their inventions, unlock the innovation process, and provide that companies are better able to conduct business without the encumbrance of meritless patent claims.”

Vonage has been fighting for its survival since June, 2006, when Verizon filed a lawsuit in U.S. District Court claiming infringement of VoIP patents Verizon claimed. In March, ajury ruled that Verizon had infringed on the Verizon patents and ordered the company to pay $58 million in damages and royalties to Verizon. A judge slapped Vonage with an injunction later that month that barred the company from signing up new customers until the patent dispute was settled, though a permanent stay of that injunction was granted in April until Vonage's appeal could be heard.

Eric Rabe, spokesman for Verizon, said the company took a dim view of Vonage's claim: “Our take is that there's no merit to their motion. This is just a delaying tactic.”

Verizon will also file a motion in court tomorrow. Rabe said that the KSR case decided by the Supreme Court and the Verizon Vonage case are not related. “They're entirely different issues,” he said. Vonage's attempts to argue that Verizon's patents are invalid have failed in court before, and would fail on appeal also, Rabe said.

San Francisco (IDGNS) - Google has agreed to buy DoubleClick for $3.1 billion in cash, an acquisition that strengthens Google's status as an online advertising powerhouse.