Google, Yahoo software moves may fuel Microsoft bid

By Eric Auchard

SAN FRANCISCO (Reuters) - Business software units of Yahoo Inc and Google Inc are introducing beefed-up versions of their Web-based software that compete with Microsoft Outlook, offering yet another clue why Microsoft Corp made a $45 billion unsolicited bid for Yahoo.

While Microsoft views Yahoo as its path into the lucrative Web advertising market dominated by Google, Tuesday's software announcements by Yahoo and Google demonstrate that Microsoft also needs to fend off potential challenges to its business software franchises.

Yahoo's new Zimbra Collaboration Suite (ZCS) 5.0 allows users to read Microsoft Outlook e-mail alongside Yahoo Mail or Google's Gmail or Zimbra's own branded e-mail.

In effect, Zimbra's upgrade lets users read work and personal e-mail side by side.

"We really think this is the next generation of Outlook that we are announcing," said Satish Dharmaraj, co-founder and chief executive of Zimbra.

Yahoo paid $350 million in September to buy Zimbra, a provider of e-mail, calendar and contacts software that competes with Microsoft and Google.

Around the same time, Google paid $625 million to acquire e-mail security firm Postini to beef up Google Apps to make it more useful inside businesses. Google Apps, a suite of software that competes with Microsoft Office. counts 500,000 organizational customers and adds 2,000 customers a day.

"We replace the old world of installing software and dealing with security patches and coming in late at night to restart computers," Scott Petry, founder of Postini in 1999 and now a Google product manager, said of his company's impact.