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Google buys Postini: How high can GOOG go?

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Google, this morning announced that it is going to buy Postini, a private company that provides security and encryption as a hosted service for instant messaging, e-mail and other forms of communications for $625 million in cash. The stock market obliged by send the stock up about $4 a share.

This has been the pattern every time Google has acquired a company and it has been perceived as one that adds overall value to the total Google value proposition. They bought YouTube, and the stock shot up. The last company that was rewarded by stock market for a buy-and-grow strategy: Cisco Systems.

In Cisco’s case, market believed that their sales team could really monetize the buys. In Google’s case, I am guessing, their ability to leverage advertising and their infrastructure are seen as key advantages. And if the stock markets stay this enamored with the Mountain View-based company, how high can GOOG go.

PS: It is a very good morning for Ryan Mcintyre, a partner at Mobius Venture Capital, and one of the Postini investors. This will help overcome any disappointments in his portfolio. Postini was on an IPO track, but Google made an offer too good to refuse.

Additional Reading:

* What’s weighing down on Google Stock?

19 Responses to “Google buys Postini: How high can GOOG go?”

  1. The acquisition makes a lot of sense. Google is executing on their enterprise strategy. A company like Postini makes it easier to do business with an enterprise customer. The cost of acquisition is peanuts compared to the money Google will have to spend to acquire those customers. Internet ad markets wax and wane. When a company like Google has the cash (and the stock), it makes sense to build out a portfolio of offerings that can be redeployed as Google branded SAAS offerings. Look for similar acquisitions in the security and managed applications space.

  2. jccodez

    The problem here is goog is not making money with software at all..not one bit…They make money spamming the internet with ads based on search results….Their poor attempts at software are terrible. They are the xbox of software, pouring money down a drain with no hope of getting a return.

  3. joe shmoe

    Hype, hype and just a lot more hype. And then a bit more. No monetization for this acquisition, in particular, in sight and yet the stock goes overboard. I do realize that GOOG is a money machine, its been cranking out good earnings, yet the irrationalism of going up on such acquisition (if the jump is indeed attritubed to this acquisition though; for I think its just the general coming back of momentum in GOOG) is just plain irrationalism, hype, bubble.