Yahoo! Inc. has signed a definitive agreement to acquire Zimbra, Inc., a player in next generation e-mail and collaboration software. The price: about $350 million in cash and stock.

The Zimbra acquisition is expected to help Yahoo expand its presence in universities and businesses and through ISPs by enabling organisations to host e-mail on or off their premises with their own domain. Zimbra''s offerings include AJAX-based e-mail, calendar, and contact management features that can be used both online and offline.

Yahoo''s mail service, one of the world''s most popular Web mail services with 250 million users worldwide, celebrates its 10th anniversary this year. Zimbra is said to have 9 million mailboxes across different segments. It is priced service, costing students $1, faculty $8, ISPs, $3, and businesses $28 per user per year.

The Zimbra email product will be pitched against Microsoft Outlook. Yahoo sees it as a means to gain advantage in its competition with Microsoft and Google in the market for Web-based collaboration software.

The Zimbra deal comes close on the heels of Yahoo''s $300-million acquisition of online advertisement network Blue Lithium and its purchase of the remaining equity of ad exchange company Right Media that it did not own, for $680 million.

Yahoo chief executive Jerry Yang says, "Our industry-leading communications products, including Yahoo! Mail, are critical to the future growth and success of Yahoo! Zimbra''s tremendous talent and innovative technology will help to extend our core mail offerings." He also sees Zimbra''s relationships with large ISPs as key to expansion of Yahoo''s worldwide partner network.

"We are excited to combine ourselves with one of the world''s most successful Web mail services and extend Yahoo''s credible brand and leadership in the e-mail business to universities, businesses and ISPs globally," says Satish Dharmaraj, Zimbra co-founder and CEO.

Zimbra will now become a wholly owned subsidiary of Yahoo. Dharmaraj will continue to lead the Zimbra team based in Yahoo''s Sunnyvale headquarters and will report to Brad Garlinghouse, senior vice president, communications and communities, at Yahoo. The transaction is subject to customary closing conditions, including regulatory approval. It is expected that the transaction will be completed in the fourth quarter of 2007.