Google buys web security firm for $625 million

Google Inc. (NASDAQ: GOOG) said on Monday that it will acquire the web-based security company Postini for $625 million as it adds to its suite of online accessible applications.

The privately held company makes software that helps encrypt electronic communications including email and instant-messaging.

With the addition of Postini, our apps are not just simple and appealing to users - they can also streamline the complex information security mandates within these organizations, said Eric Schmidt, Chairman of the Board and Chief Executive Officer of Google.

Google's web-based applications are seen as a threat to the software industry's tradition model where applications are sold and run on the local computer. The Internet-giant already has online tools to create documents, spreadsheets, instant-messaging, as well as other software in its Google Apps suite.

We think that this acquisition significantly strengthens Google's presence in online office productivity tools market, Oppenheimer analyst Sandeep Aggarwal told clients on Monday. We note that server/client hosted office productivity tools is a $12bn+ market.

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

Shares of Google rose $3.16, or 0.59 percent, to $542.56 at the end of normal trading hours on the Nasdaq Stock Market.