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Security - Monday, July 9, 2007

Google To Pay $625M For Email Security's Postini

Google plans to pay $625M in cash to acquire Redwood City, CA-based email spam/virus fighter Postini. Founded in 1999, Postini sell on-demand Enterprise email protection against spam, and virus and SMTP attacks before they hit the firewall. Claims to have over 35K customers. Gartner calls them the sector leader in vision and execution.

Why would Google acquire Postini rather than just continue to license their software? Its our assumption that Google bean counters ran the numbers and saw that at some point they would spend more than $625M on license fees that combined with thinking that Google could increase Postini's revenues. Google believes that Postini's backing will help its applications to better compete with Microsoft applications.

Postini raised $10M in Series D in September 2003 led by Bessemer Venture Partners. Previous investors are Mobius Venture Capital, August Capital, Sun Microsystems, Summit Accelerator Partners, AltoTech Ventures, and Pacifica Fund. So this is a 2nd big payday thanks to Google for Mobius VC Brad Feld, who had also invested in Feedburner.

In June, more than one blog
posted rumors that Postini had hired bankers for an IPO and that at that it was on a $75M revenue run rate. Postini recently hired a new CFO, Murray Demo as a set-up man for the IPO. He was with Adobe for ten years and was CFO for the last six.

Key competitors for Postini include Brightmail (Symantec), Frontbridge.

This is Google's strongest signal yet that it wants to be a major player in security. In May, Google announced the acquisition of GreenBorder Technologies, a maker of anti-virus and anti-spyware technology.

Jefferies & Co. says the deal “further positions Google in the corporate market and will be used to enhance security features of products offered by the Google Enteprise group.” Jefferies estimates that Google paid about 7x 2007 revenues given growth of 40% this year from $65M last year.

Citigroup says that with the deal “Google is clearly positioning itself as an on-demand/software-as-a-service enterprise provider.” Citigroup says to look for more deals to come in security from Google.

And Cantor Fitzgerald says that “the company’s enterprise push may one day serve as a meaningful driver of Google’s financials."

Investors in Postini included venture firms August Capital, Bessemer Venture Partners, Mobius Venture Capital, Pacific Fund and Summit Partners and Sun Microsystems (SUNW).
Also couple of VCs had interested comments on the deal including Bill Burnham, A VC, and Postini investor Ryan McIntire.

Read - announcement
View - Postini site