SAN FRANCISCO — In a landmark move, Google has announced plans to acquire cybersecurity firm Wiz for a staggering $32 billion. This acquisition, set to mark Google’s largest purchase to date, comes amidst scrutiny over its broad internet influence. The acquisition, detailed on Tuesday, aligns with Google’s vigorous push into cloud computing, spurred by the rising demand for data-managed services during an artificial intelligence (AI) surge. This surge is generating competition in the sector, particularly between Google, Microsoft, and Amazon.
If regulators approve this transaction, Wiz will become part of Google Cloud, a rapidly growing segment distinct from Google’s core search and advertising sectors, which heavily dominate its parent company Alphabet’s $350 billion annual revenue. With AI’s prominence escalating, the cloud division has witnessed notable growth, with revenue in 2022 soaring from $26.3 billion to $43.2 billion last year.
Wiz, a relatively young company established five years ago by four friends who met during their military service in Israel, projects $1 billion in revenue for this year. Initially founded in Israel in 2020, Wiz now operates from New York, providing security tools for data centers worldwide. Wiz CEO Assaf Rappaport expressed the synergies between the two companies stating their joint dedication to advancing security in the realm of cloud and AI.
In the wake of the announcement, Google’s CEO Sundar Pichai emphasized that merging Wiz with Google Cloud would bolster security solutions while reducing costs, a message likely aimed at reassuring regulators and attracting new clients. Google has been pursuing Wiz for some time, eventually settling on a price well above the reportedly declined $23 billion bid in July. At that time, Wiz considered an Initial Public Offering (IPO), but stock market instability led to renewed acquisition talks with Google. Now, Rappaport believes the move will accelerate innovation at Wiz, under Google’s auspices.
Market analysts at Wedbush characterized Google’s acquisition attempt as a significant challenge to competitors like Microsoft and Amazon, who are also eyeing expansion in cybersecurity to dominate cloud computing. Google had been trailing these tech behemoths, but acquiring Wiz might level the playing field. This acquisition will surpass Google’s prior largest acquisition, the $12.5 billion purchase of Motorola Mobility in 2012, and will be the biggest cybersecurity purchase recorded, making it one of the top 20 priciest software acquisitions ever. Nonetheless, Alphabet experienced a 2% share drop after the announcement, closing at $160.67.
Despite some acquisitions turning notably successful, such as DoubleClick in 2008 and YouTube in 2006, Google’s business dealings often come under regulatory examination, evident from its antitrust case with the U.S. Justice Department over ad distribution practices. More legal actions concern the company’s alleged monopoly over digital search markets, a trial Google will soon face penalties for.
The Wiz acquisition will also face regulatory scrutiny, particularly as tensions about tech dominance continue. Though there may be an administration shift with differing attitudes towards tech mergers, FTC Chairman Andrew Ferguson’s stated commitment to overseeing tech giants closely remains. Concerns persist regarding how this acquisition might affect independent cybersecurity firms and larger competitors, as indicated by industry experts who recognize the sector’s consolidation potential during the AI boom.
While antitrust issues stalled sales negotiations last year, confidence in a favorable U.S. regulatory response appears to have grown, prompting this deal under current governance. However, opposition voices, such as those from Demand Progress Education Fund, urge a halt to this corporate consolidation, citing excessive market power. Assuming all regulatory requirements are met, Google and Wiz foresee concluding the acquisition by 2026.