The Ponderings of Woodrow

Postini = Google's Most Enterprisey Acquisition Yet

OK, chances are this is not the first blog post you've read about Google's $625mm purchase of Postini today. At last count, Techmeme had 1,003 posts on the subject.

Google has been so acquisitive this year it's hardly news that they made another acquisition. But Postini is a horse (acquisition) of a different color; squarely focused on providing solutions to the enterprise. They provide a host of messaging security and infrastructure services to more than 35,000 companies and 10,000,000 users. Postini processes more than 2 billion SMTP connections and block more than 1 billion spam messages every single day.

A quick word of congratulations to Ryan, Brad and the rest of the Foundry Team. There are a lot of interesting nuances to this deal, not the least of which is the fact Postini was considered a likely IPO this year. So many of my favorite bloggers have written about this deal today, I'm simply going to hand it off to them:

• Ryan blogs about the deal from his perspective:

...What attracted us most to Postini was (FOUNDER) Scott Petry's vision of building out a true platform company built around the simple notion that email had become more important to corporate America than the telephone. A company that could build a suite of services around messaging would have the potential to harness a huge customer base given the broad horizontal nature of email. The total addressable market was every email address in the world.

Equally important was Postini's architecture and deployment model. Postini was a SaaS company well before SaaS was cool, and probably even before the acronym of SaaS had been coined. We loved the ease of deployment (just a change to the MX record in DNS) and the recurring revenue subscription model. And while the most notable SaaS companies to date have been built around specific vertical business applications, Postini is arguably among the first SaaS infrastructure companies...[continued]

• Bill Burnham hits the nail on the head with his analysis. I implore you to read his entire analysis, but here are his key takeaways:
  • Google is going after Microsoft Exchange [I agree]
  • Postini puts Google much closer to functional parity [I agree, presuming tighter integration]
  • This is bad news for traditional anti-spam vendors [I agree, in principle]
  • Google has put together an impressive set of hosted applications [I wholeheartedly agree]
  • Google can AND does pay up for assets it views strategically [How can I not agree?]
  • When Google is interested, they've yet to be outbid [Agreed]

• Cote breaks down the deal as part of the broader Microsoft vs. Google meme, and ultimately argues that Google is too smart to attack Microsoft using a traditional enterprise sales model:

The point for me is simple: Google wants people to use it’s software and click on its ads. Sure, it may not be on purpose that that means pulling people away from Microsoft software and services. Nonetheless, it means competing to get attention and dollars that could otherwise go to Microsoft and other vendors. What irks me most about this position is not the people who espouse it — like I said, “potato,” “patato” — but that Google itself seems so, well, goofy when it tries to weave and duck on the issue.

The question for Google isn’t “are you competing with Microsoft?” The question is more along the lines of: do you want as much of Microsoft’s attention-cum-revenue as you can get?

As an enterprise-focused technologist, this deal piqued my curiosity much more than the DoubleClick and YouTube deals. This is not to dismiss their potential strategic value, but rather, this is the first evidence I've seen that Google is ready to take the kid gloves off outside of the ad-driven model.

Note: This is not a recommendation to buy or sell any publicly-traded security. This discussion is merely a personal analysis to foster discussion for informational purposes only. At the time of this writing, I and/or funds I maintain discretionary control over, maintained a long equity position in MSFT but did not maintain a position (long or short) in GOOG or any of the other companies mentioned. We reserve the right to initiate positions in any of these companies at any time in the future. At times, we may maintain derivative options as a hedge on underlying positions.

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Musings on the Google + Doubleclick Deal

By now you're well aware of Google's acquisition of DoubleClick for $3.1billion.  Few things get the blogosphere buzzing like a juicy Google story, and this one was no exception.  With Techmeme being taken over by this deal, there isn't much new I can add to the conversation for now. Instead, let me highlight some of the coverage I found most interesting:

• Fred Wilson on banners being the new black
• Brad on the 10x return on equity Hellman and Friedman generated in two years time
• Matt Ingram on the irony of Microsoft's antitrust claims
• Paul Kedrosky on why focusing on valuation is pointless in this deal
• Eric Savitz on the sell-side reaction to the deal
• Phil Wainewright on the difficulties of serving two masters [publishers and advertisers]
• Larry Dignan on why Yahoo! comes away looking good from this deal
• HipMojo with a contrarian take on why this deal makes little sense
• Will Hsu on Google-DoubleClick coming full circle

So where do I stand on the deal?

1) The big winners here are clearly Hellman and Friedman. They made a smart, ballsy call that was met with a LOT of cynicism at the time; and came out with enormous returns for themselves and their LPs
2) This wasn't a defensive move on Google's part, it was an offensive one
3) Regardless of whether the purchase price was egregious, I don't want to hear that Microsoft is better off for having not made the deal. There was a time, not so long ago, when Microsoft wouldn't have been outbid for a strategic asset. The fact Microsoft was in the bidding, and by most accounts initiated the talks, speaks volumes
4) The inevitable "myth of cascading M&A" was in full effect today, with 24/7 Media (TFSM) and Aquantive (AQNT) up sharply as traders tried to find the "next" deal in the space. My bet? None of the above

Note: This is not a recommendation to buy or sell GOOG or any other security, but is merely a personal analysis to foster discussion for informational purposes only. At the time of this writing, I and/or funds I maintain discretionary control over, maintained a long equity position in MSFT and YHOO but did not maintain a position (long or short) in AQNT, GOOG or TFSM . We also may, at times, carry derivative options on underlying positions as a hedge.

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