Google has recently announced its decision to acquire the cybersecurity company Wiz for a staggering $32 billion, marking the most substantial acquisition in the tech giant’s 26-year history. This proposed acquisition, unveiled on Tuesday, is a part of Google’s strategic expansion into the realm of cloud computing amidst the current boom in artificial intelligence. With the AI sector experiencing rapid growth, there’s a heightened demand for data centers, leading Google to compete fiercely with major players like Microsoft and Amazon in this sector.
Provided the all-cash deal gains approval from regulators, Wiz is set to become part of Google Cloud. This division is becoming an increasingly crucial aspect of Google’s operations, distinct from its primary search and advertising businesses, which represent the majority of the $350 billion annual revenue for Alphabet, Google’s parent company. The cloud division’s significance is underscored by its impressive revenue growth, jumping from $26.3 billion in 2022 to $43.2 billion in the following year, a 64% increase.
Assaf Rappaport, CEO of Wiz, expressed the mutual commitment shared by both companies in a blog post, emphasizing the need for cloud security to be more intuitive, accessible, and democratic, enabling a wider range of organizations to adopt cloud and AI securely. Google CEO Sundar Pichai echoed this sentiment in a statement, suggesting that the partnership between Google Cloud and Wiz will enhance cloud security and facilitate the use of multiple cloud services.
Based in New York and established in 2020, Wiz specializes in developing security tools aimed at safeguarding information housed in remote data centers, catering to clients ranging from emerging startups to large governmental bodies. Google had its eyes on Wiz for quite some time. Initially, Wiz dismissed a $23 billion offer in favor of pursuing an initial public offering. However, due to stock market instability affecting the IPO market, Wiz has now aligned with Google, hoping to advance its innovative capacities.
Market analysts at Wedbush see Google’s acquisition of Wiz as a bold strategic maneuver against rivals like Microsoft and Amazon, both of which have made substantial cybersecurity investments as part of their strategies to dominate the cloud computing industry. Google has previously lagged in the cloud market; however, the acquisition of Wiz may alter this dynamic. This bid is significantly larger than any previous Google acquisition, surpassing the $12.5 billion Motorola Mobility purchase from 2012, which failed to meet expectations.
Google’s other acquisitions have proven highly successful, such as the $1.76 billion acquisition of YouTube in 2006 and the $3.1 billion purchase of the ad tech platform DoubleClick in 2008. Yet, Google’s deals have also invited scrutiny; the DoubleClick deal is currently embroiled in an antitrust case filed by the U.S. Justice Department regarding the company’s dominance in online ad distribution. A decision for that case, which questions whether Google exploited its market position to manipulate digital advertising prices, is expected this year.
The Wiz acquisition comes at a time when Google is defending itself against regulatory attempts to dissolve its extensive internet operations. In a notable antitrust case, a federal judge last year ruled that Google had turned its search engine into an illegal monopoly, with the penalization phase of this trial set to commence soon. Potential penalties include a mandate for Google to sell its Chrome browser and prohibitions on deals making Google search the default engine on Apple’s devices.
The Wiz deal is also under antitrust scrutiny due to potential repercussions for independent cybersecurity vendors and larger competitors. While the regulatory environment under the current administration might be conducive to business deals, there remains skepticism regarding the influence of large tech firms. Nevertheless, Wedbush analysts note the industry’s potential for consolidation, suggesting that the tech sector could benefit from significant growth opportunities as AI continues to evolve. Google and Wiz have assured that Wiz’s services will remain compatible with all major cloud providers, including Amazon Web Services, Microsoft Azure, and Oracle Cloud, along with additional security partners. Contingent on regulatory clearance and other conditions, Google and Wiz aim to finalize the acquisition by 2026.
Following the announcement, shares of Alphabet, Google’s parent company, experienced approximately a 3% decline in late morning trading on Tuesday.
