$625M in cash - Google gobbles up Postini

This announcement came out this morning - Google is buying Postini for $625 Million in cash! (Disclaimer: groupSPARK is a Postini partner.)

Postini is best known for its leading spam filtering services, but also offers the complete set of messaging security and compliance services. According to the press release, Postini serves over 10 million users from 35,000 businesses. Not bad for a company with about 300 employees, which means that on average, each employee generated about $2 Million of value.

Overall the SaaS messaging space is heating up - and is a key battlefront between Google and Microsoft. After all, email is the killer app for SMB's. So far, the messaging battle between the two titans has been in free email - Gmail vs. Hotmail. Google really shook the battlefield up when it introduced its gigabyte storage limit. And because the SMB market is where the real money is, this is where the war has now moved to for messaging.

This acquisition is the first volley from Google attacking Microsoft's hold on the lucrative messaging software for SMB's. Google ultimately wants to go after the Microsoft Exchange Server market, but hasn't much success so far getting SMB's to pay for services. Postini, on the other hand, has only paid offerings - which is a knowledge set that Google needs - from both a sales & marketing perspective to providing technical support.

Postini has a very similar set of offerings to Microsoft's EHS division, which was the result of Microsoft's acquisition of FrontBridge in August 2005. Google is playing catch-up here, but clearly will pose a strong challenge to Microsoft in the future.