UPDATE 2-Google to buy Web security co Postini for $625 mln

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.

Google said the deal would enable it provide organizations with more Web-based services similar to its Google Apps package, which includes its e-mail service Gmail, Calendar, and Talk, its messaging service.

Google has been expanding its range of services from Web search and advertising to include popular software applications for businesses, such as word processing, putting it in direct competition with Microsoft's Office package of applications.

Google Apps has been signing up more than 1,000 small businesses daily and been adopted by more than 100,000 businesses since it launch last August, the company said. The launch was made in anticipation of upgrades in Microsoft's Windows and Office franchises to a more Web-based focus.

"For Google customers this is a clear statement that we're very committed to this business," Dave Girouard, general manager of Google Enterprise, said on a conference call with analysts. "We're going to continue to innovate and bring more and more applications and services to businesses.

The Web search leader aims to make the Google Apps package attractive to large businesses as it adds security and compliance applications.

Google also recently launched a service called Google Gears to enable Web-based applications such as e-mail and calendars to work when users are offline.

San Carlos, California-based Postini is backed by investors including August Capital, Bessemer Venture Partners, Mobius Venture Capital, Pacifica Fund, Summit Accelerator Partners and Sun Microsystems Inc (SUNW.O: Quote, Profile , Research).

Google said Postini will become a wholly owned subsidiary. The deal is expected to close by the end of the third quarter.

Postini is the latest in a string of acquisitions and alliances by Google in recent months, from its planned $3.1 billion purchase of Web marketer DoubleClick to a deal for Web calling start-up GrandCentral for an undisclosed sum.

Last month it also bought Feedburner, a Web media distributor and formed an alliance with Salesforce.com Inc. (CRM.N: Quote, Profile , Research), a Web-based marketing software maker.

Wall Street analyst firm Think Equity raised its price target on Google's shares to $700 from $620 on Monday.

Shares of Google moved up $3.32 to $542.72 in morning trading on the Nasdaq.

News From : REUTERS