Google's Postini Buy Has Some Interesting Implications
It was announced today that Google has purchased Postini for $625M in cash. Before I give a few thoughts on the deal I want to congratulate Ryan McIntyre who I used to work with at Mobius Venture Capital. Ryan made the initial investment in Postini and staunchly supported the company. He has a good post up on the acquisition that you can read here.
In terms of the deal itself I think this deal has several implications:
- Make no bones about it, Google is definitely going after Microsoft's Exchange franchise. With the addition of Postini, if they just add push e-mail support and an off-line client, GMail will basically be as good, if not better than Exchange. I haven't heard anything about an off-line client for GMail but as Zimbra has demonstrated, it's possible so I would expect to see something like this from GMail in the near future. Speaking of Zimbra, IBM should buy Zimbra and kill off Notes. Zimbra is the only chance it has of keeping up with MSFT and GOOG in the e-mail race at this point.
- This is not good news for other anti-spam companies, especially if GOOG decides to offer Postini's basic anti-spam services for free. The way Postini works (you simply redirect you MX traffic to go through their servers) reminds me of how Feedburner works. Google started offering all of Feedburner's services for free shortly after they acquired them, so it would be logical to suspect that some kind of price cut, potentially all the way to free is coming for Postini's services. That's not good for other folks out there trying to make a profit on their anti-spam services.
- If you look at Google's recent enterprise oriented acquisitions they are building a pretty compelling set of hosted applications. Not only do they have e-mail covered but they have the big three productivity apps (word processor, spreadsheet, presentation) covered as well. They also added in Wiki capability (via JotSpot). To link all this together all they need is a hosted file server and integrated search across all these apps (basically a hosted version of Google Desktop). That's a pretty powerful suite of services.
- Over the years, Postini received lots of inbound M&A interest, but the only bid they hit was Google's. I think this speaks to two issues that other companies attempting to compete with Google in the M&A market have: 1) Google not only can afford to pay more for companies, it does pay more. Google's competitors simply can't compete with Google's prodigious cash flow, multiples, and willingness to take dilution. 2) Google not only pays more, but is perceived as a better place to work by most targets. Thus, the management team is happy to support a Google deal because they know their team will be happy. This does not bode well in the short term for Google's competitors.
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The thoughts and opinions on this blog are mine and mine alone and not affiliated in any way with Inductive Capital LP, San Andreas Capital LLC, or any other company I am involved with. Nothing written in this blog should be considered investment, tax, legal,financial or any other kind of advice. These writings, misinformed as they may be, are just my personal opinions.