Zimbra, a unit of Yahoo, is pressing ahead with improvements to its online e-mail system, even though analysts say Zimbra mail poses too much of a challenge to Exchange to stay alive if Microsoft succeeds in acquiring Yahoo. "Microsoft will have to decide what to do with Zimbra; our guess is that it will let it wither and die, rather than spin it off and leave it as a threat to Exchange," wrote The 451 Group analysts Nick Patience and Brenon Daly last Friday on the heels of Microsoft's offer of $44.6 billion for Yahoo.

Scott Dietzen, former president of Zimbra and now CTO of the Yahoo Zimbra unit and VP of engineering at Yahoo, said in an interview Friday that he had convened the Zimbra team on the morning of the offer and all agreed they must stay focused on "innovation in ZCS [Zimbra Collaboration Suite], building the Zimbra community and customer base."

Since Zimbra code is open source and "the open source grant we made to the world is irrevocable," an open source alternative would remain if for some reason the Zimbra team were disbanded inside Yahoo, he said in so many words.

So what's Zimbra doing? Launching Version 5 of Zimbra Collaboration Suite, "the most significant release the Zimbra team has ever made," said Dietzen.

The suite is a combined e-mail, address book, search, calendar, instant messaging, and document creation application that adds features to standard productivity applications by using Ajax on the Web. Version 5.0 provides for four different types of e-mail accounts for an individual user, including personal, business, Google Mail, and Yahoo Mail, all handled in one ZCS account. A user can launch Yahoo search from Zimbra Collaboration Suite, upload an attached photo in an e-mail to Yahoo Flickr, or send an attached document to Zimbra Briefcase, a file folder online where other parties may view or join in editing the document, Dietzen said.

Zimbra Desktop, formerly in beta release, has been included in 5.0, which allows Zimbra users to work either offline on e-mail, compose documents, fill in a calendar or schedule tasks, all of which gets synchronized with the online applications as the user reconnects.

The Zimbra mail application now supports Research In Motion's BlackBerry Enterprise Server, allowing Zimbra mail to reach a wide range of client devices. Mail may be delivered to Java-enabled smartphones, such as the Motorola Razr, any BlackBerry Enterprise Server-supported device, or any device supporting a mobile Web browser.

These devices may make use of instant messaging as well as regular e-mail and the Zimbra Briefcase feature.

The online/offline characteristics of ZCS 5.0 might mean that Microsoft would need Zimbra to compete with a growing slate of Google online applications. Google apps are getting more powerful, and "as a defense against this position, Microsoft needs to accelerate its own move into online services."

"The online engineering capabilities that Yahoo has will undoubtedly offer Microsoft the potential to bring new services to market," wrote David Mitchell, an analyst at Ovum.