Google Inc. is buying e-mail security specialist Postini Inc. for $625 million (€459 million), fortifying the Internet search leader's effort to sell online software services to corporate customers seeking alternatives to Microsoft Corp.'s long-dominant products.
The all-cash deal announced Monday is aimed at reassuring large businesses that have had qualms about entrusting Google to oversee their e-mail systems and other vital applications because of security concerns.
Google began selling companies a low-cost suite of online software that includes e-mail, calendaring and word processing in February, hoping to diversify its revenue beyond Internet advertising and perhaps siphon money away from Microsoft — one of its biggest rivals.
Microsoft is trying to challenge Google in the rapidly growing Internet ad market by drawing upon the cash that it has amassed from its market-leading Office suite of software applications and Windows operating system that controls most personal computers.
Google and other Internet companies are threatening Microsoft's stronghold by offering free or low-cost software applications that are hosted online so they don't have to be installed on the hard drives of individual computers.
Although Google says an average of about 1,000 small businesses sign up to use its software applications each day, security worries had become a "road block" to even wider acceptance, said Dave Girouard, the executive in charge of the company's push into the corporate market.
Google believes it will offer potential customers more peace of mind with Postini's added expertise.
Formed in 1999, San Carlos-based Postini provides e-mail and instant messaging protection to about 35,000 customers with more than 10 million users. The list of Postini's customers include retailers Circuit City Stores Inc. and Dillard's Inc. as well as natural gas supplier Sempra Energy and Pulte Homes Inc.
Postini and Google formed a partnership in April, paving the way for the negotiations that culminated in the deal announced Monday. Postini executives said the privately held company has been profitable since 2004, the AP reports.
Google's purchase also pits the company against security software makers Symantec Corp. and McAfee Inc., Jefferies & Co. analyst Youssef Squali wrote in a report today. Symantec bought Brightmail Inc. in 2004, adding technology to block junk e-mail.
Before the Google purchase, Postini may have been nearing an initial public offering, 451 Group's Daly said. In May, Postini named Murray Demo chief financial officer. He spent 10 years with Adobe Systems Inc., including six years as CFO.
“You don't hire a seasoned public market CFO who's overseeing a company with $2.5 billion in revenue to help sell a startup,” Daly said. He estimates that Postini was headed for sales of $110 million this year, Bloomberg reports.
Prepared by Alexander Timoshik
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