Postini Snatched Off IPO Track By Google

This just hit the wires this morning at 8:00 AM Eastern: Google to buy Postini for $625M in cash. Here’s the official press release.

Google will add Postini’s on-demand “security” (nee anti-spam) offering to its stable of Google Apps. Judging by the fact that Dave Girouard, VP and general manager of Google Enterprise, is the spokesperson in this Register story, and given the nature of the following quote, it seems clear that Google is attempting to build a base in small and medium business (SMB) on-demand productivity apps and then work their way up into the enterprise in the much same way that Salesforce.com did with on-demand sales automation apps.

Girouard’s quote:

The response to Google Apps has been tremendous, with more than 1,000 small businesses signing up for the service every day. At the same time, large businesses have been reluctant to move to hosted applications due to issues of security and corporate compliance. By adding Postini products to Google’s technology, businesses no longer have to choose,” said Dave Girouard, VP and general manager of Google Enterprise.

My guess is that Postini was tracking towards an IPO within the next 6-12 months, which suggests that they were doing somewhere between $80 and $100M in revenue this year (my take on the new IPO entry bar). This suggests a valuation somewhere between 6-8x sales. Salesforce.com, the king of the on-demand sector, trades for 9x TTM revenues (see here), and the industry and sector trade for 5-6x revenues.

Some simple math (assuming 40% growth and 40%/60% 1H/2H revenue linearity — both are standard assumptions and neither of which I have any specific reason to believe true) says that current year revenue is 1.2x TTM revenue, suggesting a 7.5 to 9.5x valuation for Postini, in-line with the premium you’d expect to pay for snatching the IPO dream from a company that could see it within reach.

Here’s the Google Blog commentary on the deal. Here’s their FAQ. Finally, here’s the Google Enterprise Blog commentary as well.