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Just An Online Minute... Acquisitions Rev Up Google-Microsoft Rivalry

Cranking up its battle with arch-rival Microsoft, Google today said it has agreed to buy e-mail services company Postini for $625 million in cash.

With Postini, which offers spam filters, encryption and other e-mail security services to businesses, Google will be able to give companies even more incentive to use its Google Apps software package, which includes programs for word processing, spreadsheets, e-mail and instant messaging.

"With this transaction, we're reinforcing our commitment to delivering compelling hosted applications to businesses of all sizes," Google CEO Eric Schmidt said in a statement. The company says more than 1,000 small businesses sign up for Google Apps daily; Postini currently serves more than 11 million users.

Obviously, any services that make Google Apps more attractive to businesses pose a threat to Microsoft, which has long sold its word processing, spreadsheet and e-mail programs to companies.

At the same time, just as Google is boosting its efforts to take on Microsoft in software, Microsoft is gearing up to challenge Google in the online ad space. The FTC just paved the way for a big Microsoft effort in that regard, its planned $6 billion buyout of aQuantive, by declining to request further information about the deal. Shareholders are slated to vote on the acquisition next month.

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