What Does Google's Purchase of Postini Mean For Commtouch?

Monday's purchase by Google (GOOG) of the privately held email security firm Postini for $625 million has sent the shares of rival Commtouch (CTCH) soaring up 8.5%. As I posted a month and a half ago, Commtouch is also focused on email defense.

By the year 2010, Gartner predicts that there will be 2.5 billion e-mailboxes. With over 180 billion messages per day, 85% of which are spam, Commtouch develops and provides proprietary anti-spam, Zero-Hour™ virus protection, and Reputation Service solutions.

In his blog, Roger Carter speculates about a new OEM deal that Commtouch may be working on with Checkpoint (CHKP), where Commtouch’s technology could be deployed within Checkpoint’s new UTM product line. Aside from the possible Checkpoint deal, Commtouch is signing bigger and bigger OEM deals, and this has yet to be fully reflected in Commtouch’s sales pipeline, and revenues.

Google’s acquisition proves that Commtouch is heading in the right direction. With Q1 revenues increasing over 63% from same period last year, and generating an operating cash flow of $953 thousand during Q1 2007, I am eagerly awaiting their Q2 numbers as I expect both revenues, and profitability to continue to grow strongly.

Disclosure: The author is long both CTCH and CHKP as July 2, 2007. He has no position in any of the other company’s mentioned.

CTCH 1-yr chart:

Comments

[maurene.grey:]

As you pointed out, Commtouch is a pure-play OEM with a "in the Internet cloud," network-based approach for detecting email spam and other bad email.

"Google’s acquisition proves that Commtouch is heading in the right direction." -- a true statement but not solely specific to the Postini acqusition. Commtouch is an OEM dynamo and could just as easily do an OEM deal with Google to supplement the Postini technology and process. With the ongoing demise of the email-centric security market

2007 Jul 10 07:45 AM

[tracyjb_nt:]

"Monday's purchase by Google (GOOG) of the privately held email security firm Postini for $625 million has sent the shares of rival Commtouch (CTCH) soaring "

This opinion is completely off the wall, there are several other contributing factors with the most important being the Emerging Growth Conference presentation. Other factors include the new OEM agreements and the inclusion of CTCH on a "top ten tech stock list" on a very popular trading site www.fool.com/investing...

2007 Jul 10 09:54 PM