With Purchase, Google Targets Large Businesses

By Kendra Marr
Washington Post Staff Writer
Tuesday, July 10, 2007

Google delved deeper into the business software market yesterday with its announcement it would acquire Postini for $625 million in cash.

Postini, a closely held company with about 300 employees, sells software that protects e-mail, instant messaging and other Web-based communications from viruses and spam. The company said it hopes the acquisition would attract larger business clients seeking to comply with complex security regulations.

Google, which started by offering applications aimed at consumers, has been developing and promoting software that businesses and corporations use, trying to make inroads into Microsoft's market. Microsoft sells software such as Office through retailers while Google distributes applications over the Internet and makes money from advertising and subscriptions.

"There's nothing to install, nothing to maintain, and it costs much less," said Dave Girouard, vice president of Google Enterprise.

This is the second security company to be bought by Google. Two months ago it acquired GreenBorder Technologies.

Other companies have made similar moves to obtain Internet security services. In 2005, Microsoft acquired FrontBridge Technologies, a Postini competitor. Internet security company Symantec bought Brightmail in 2004, fortifying its defense against junk mail. Google said it expects the Postini deal to close by the end of the third quarter.

Google's foray into business software began after it added applications like Internet calendars, a Web page publisher and embedded instant messaging to its e-mail service Gmail. Last year the company snapped up Writely, an online word processor, to enhance its Docs & Spreadsheets application, which lets users share information in real time. And last week, Google bought GrandCentral Communications, a Web-based phone service that allows users to manage voice mail online and program one phone number to ring multiple phones.

As Google adds more applications, it further challenges established business software like Microsoft Office. Google Apps, the collection of Google's business software, has attracted about 100,000 business users and a handful of university clients, according to the company.

About 1,000 small businesses sign up for Google Apps each day, but larger businesses have been reluctant to move to Internet applications because of security and corporate compliance requirements, Google executives said yesterday. Adding Postini would help streamline the intricate security mandates of these big organizations, they said.

Postini serves 35,000 business customers worldwide. Google will continue to support existing Postini customers outside Google Apps. The two companies started partnering on administration, security and archiving for Gmail in April, and that relationship evolved into acquisition talks.

"Clearly Google was an opportunity to accelerate our own strategy and our own growth," said Quentin P. Gallivan, chief executive of Postini, based in San Carlos, Calif.

Shar VanBoskirk, analyst for Forrester Research, said Google is attempting to expand its online role.

"This is a great, competitive thing to do against Microsoft," VanBoskirk said. "As we continue to watch the sparring match, this is Google saying to Microsoft, 'We're going to compete in your core business. It's not just the online advertising world, we're going to compete in the applications world as well.' "

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