Google Plucks Postini

Google shells out $625 million to beef up managed services portfolio

July 10, 2007

3 Min Read
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The worlds of storage and security continue to converge, as search giant Google throws down $625 million in cash for archiving specialist Postini. (See Google Acquires Postini and Who Makes What: Security Appliances.)

Google's also aiming to boost its hosted services story.

Postini is one of a number of vendors, including Iron Mountain and Zantaz, that offer managed archiving services, touting the ability to securely handle users' emails and instant messages (See Managed Email: Who's Watching?, Postini Picks Archivas, and Postini Paves Way.) In all, Postini claims 35,000 companies worldwide deploy its solution.

Last week, Zantaz was bought by data search specialist Autonomy. (See Autonomy Acquires Zantaz for $375M, Autonomy Acquires Zantaz, and Microsoft Pulls In FrontBridge.)

Google is looking to build Postini's email and IM offerings into its own Google Apps portfolio of hosted services, which includes Gmail and Google Talk. (See Google's Creative Block and Energizing Exchange.)Google says 1,000 users a day are signing up for Google Apps. During a conference call earlier today, Dave Girouard, vice president and general manager of Google's enterprise division, admitted that the bulk of these are SMBs, although he said that some are enterprises.

The hosted model is key nonetheless. "Software as a service is really a better delivery method for technology," said Girouard. "There's nothing to install, there's nothing to maintain."

Competition in the space is increasing. "The Postini purchase puts the company in competition with Symantec, which acquired BrightMail 3 years ago; McAfee, and WebSense," states Jeffries & Company analyst Youssef Squali in a note today.

Separately, Squali thinks Postini's security features are likely to make their way into Google's family of search appliances. (See Symantec Buys Brightmail , Symantec Unveils New Spam Solution, Symantec Buy Sends Instant Message, Google Unveils New Mini, and Content Classifiers Glom Onto Google.)

A specific roadmap on the integration of the two companies and their product lines is still being thrashed out, according to execs on today's call, although more details are expected when the deal closes in the third quarter.San Carlos, Calif.-based Postini currently has around 300 employees, including CEO Quentin Gallivan and his management team. Tracy Eiler, the vendor's vice president of marketing, says it's too early to tell how many of these will be moving over to Google. "Specific details about exactly how many people [move] have not been made yet, although we know that Google is very interested in the talent at Postini."

During the call, Gallivan hinted that he will be staying on. "Team Postini is extremely excited about the Google merger," he said. "Both companies share the same vision for the future of on-demand and software-as-a-service."

On today's call, Girouard confirmed that Google will continue to support Postini's 35,000 customers indefinitely. "We're fully committed to developing [the products] and supporting them," he said, explaining that Postini will now operate as a wholly-owned subsidiary of Google.

Although Postini did not break out numbers on today's call, around 30,000 of the vendor's customers are SMBs, according to Jeffries & Company's Squali. Tucked away within the remaining 5,000 customers are large enterprises such as Merrill Lynch, UBS, Glaxo, Lehman, Fidelity, and Starbucks , he explained. "[This is] giving Google a platform to cross-sell its other corporate offerings."

Postini, which was founded in 1999, has been cash flow positive since 2004, although the startup plays its exact financials close to its chest. Jeffries & Company estimates that Postini generated around $65 million in revenue in the 2006 financial year, and is on track for more than 40 percent growth this year.James Rogers, Senior Editor Byte and Switch

  • Autonomy Corp.

  • Google (Nasdaq: GOOG)

  • Iron Mountain Inc. (NYSE: IRM)

  • McAfee Inc. (NYSE: MFE)

  • Merrill Lynch & Co. Inc.

  • Postini Inc.

  • Symantec Corp. (Nasdaq: SYMC)

  • Websense Inc. (Nasdaq: WBSN)

  • Zantaz Inc.

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