Google to buy security firm

Google Inc. said Monday that it had agreed to buy Web-based security provider Postini for $625 million, expanding its package of online applications to compete with Microsoft Corp.’s Office franchise.

Privately held Postini provides security and encryption services, protecting instant messaging, e-mail and other communications, to more than 35,000 businesses and 10 million users worldwide.

The deal will help Google provide larger organizations with more Web-based services similar to its Google Apps package, which includes its e-mail service Gmail, word processor, spreadsheet and business presentation software.

“It’s still a relatively small business for them, but we note they spent something like $750 million to $1 billion this year in acquiring companies to boost ... efforts in the software and application space,” said Marianne Wolk, an analyst at Susquehanna Financial.

The online search leader was among the first companies to make business software applications available over the Web, getting its suite of office products widely deployed ahead of Microsoft.

Google Apps has been signing up more than 1,000 small businesses daily and has been adopted by more than 100,000 businesses since its launch in August, the Mountain View, Calif.-based company said.

Google, which has been diversifying away from its core in search and advertising, aims to make the Google Apps package attractive to large businesses by adding security and compliance applications from Postini.

“This is a set of capabilities required before a business would think about moving its e-mail or IM onto a hosted service,” said Dave Girouard, general manager of Google Enterprise.

San Carlos, Calif.-based Postini is backed by investors including August Capital, Bessemer Venture Partners, Mobius Venture Capital, Pacifica Fund, Summit Partners and Sun Microsystems Inc.