The Street Enthuses Over Google's Postini Acquisition; Symantec, McAfee and WebSense Don't

Google (GOOG) Monday morning announced a deal to buy privately held Postini for $625 million in cash. The Street seems to like the deal, which is Google’s third largest acquisition after DoubleClick (DCLK) and YouTube.

Postini provides anti-spam, anti-virus and instant messaging scanning for small- and medium-sized businesses. Youssef Squali, an analyst with 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 Enterprise group,” including Google Apps, the Google search appliance, Google Mini and Google Earth.

Squali estimates that the company paid about 7x 2007 revenues; he figures the company had $65 million in 2006 revenue, and should grow 40% this year. Citigroup’s Mark Mahaney thinks the price tag was higher: he estimates it paid 8-11x revenue “based on peer previous transactions.” Mahaney says that with the deal “Google is clearly positioning itself as an on-demand/software-as-a-service enterprise provider.” He thinks there will be more deals to come from Google in this sector. Cantor Fitzgerald’s Derek Brown says that “the company’s enterprise push may one day serve as a meaningful driver of Google’s financials.”

Squali notes that the deal puts Google in competition with some new rivals: Symantec (SYMC), which acquired BrightMail 3 years ago; McAfee (MFE) and WebSense (WBSN).

Meanwhile, ThinkEquity’s Stewart Barry, who you may remember downgraded Yahoo (YHOO) Monday, raised his price target on Google Monday to $700 from $620. Why? “Checks indicate that GOOG should continue to capture incremental share of search queries/marketer budgets and is well positioned to become the leader in the much-coveted non-premium display market, thereby materially expanding the company’s market opportunity.”

Investors in Postini included venture firms August Capital, Bessemer Venture Partners, Mobius Venture Capital, Pacific Fund and Summit Partners and Sun Microsystems (SUNW).

See also: Google Getting Serious About Taking On Microsoft In Enterprise • What Does Google's Purchase of Postini Mean For Commtouch?

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