San Jose (CA) - Symantec is aiming to build a significant presence in the increasingly lucrative Software-as-a-Service (SaaS) space with the announced $695 million acquisition of MessageLabs, a business email archive and email retention provider. The acquisition gives birth to a new SaaS giant that reaches out for a leadership role in the online security secure and information management segments. Both companies will cross-sell and up-sell to each other's user bases through a newly created SaaS. In the long-term, we expect new cloud services and for the short term we will see Symantec tapping MessageLabs’ 14 worldwide data centers and SaaS sales force, operations and support to roll out its own network services on a global basis.

Symantec, the 800-pound gorilla of the software security, is expected to quickly combine its product portfolio with the offerings of Message Labs, which is the market leader in its market segment with a share of about 33%. Symantec said that it has signed "a definitive agreement" to acquire MessageLabs for a purchase price of approximately $695 million in cash, payable in roughly £310 million and $154 million, topping Google's $625 million acquisition of Postini last year. The agreement, subject to regulatory approvals, is expected to close by the end of the year. The acquisition is generally expected to result in the broadest set of online services to secure and manage information available today.

"By combining MessageLabs with our Symantec Protection Network team, we have one of the strongest portfolios of cloud-based infrastructure services and a great foundation on which to grow," said Symantec's chairman and CEO John Thompson. MessageLabs' CEO Adrian Chamberlain stressed the benefits of his company's services that "help ensure that only safe and appropriate information enters and leaves the organization."

The acquisition gives Symantec a significant footprint in the increasingly lucrative SaaS market, which – according to IDC - is estimated from an annual volume of $5.71 billion this year to $16.98 billion in 2012. The deal is expected to mutually benefit the two companies in several ways. Symantec will benefit from cross-selling and up-selling its existing backup, storage and online remote access services into MessageLabs' 8 million installed user base and more than 19,000 business and enterprise clients. In comparison, Google’s Postini claims that it has more than 35,000 business customers and more than 10 million users worldwide.

The acquisition may also result in a cloud offering that will tap into Symantec's expertise in data loss prevention, compliance, endpoint security and archiving and MessageLabs experience with sales, operations and support of cloud services. A new Symantec SaaS group will be created by combining MessageLabs and Symantec's Protection Network to enable both companies' customers to purchase Symantec and MessageLabs cloud offerings from a single location. Also, Symantec will leverage MessageLabs worldwide data centers to roll out Protection Network services on a global basis.

MessageLabs grew by more than 20 percent over the prior fiscal year and generated $145 million in revenue during the period ending July 31.