Google-parent Alphabet is near a deal to buy cybersecurity startup Wiz for about $23 billion, according to multiple reports. A deal would mark Google's biggest acquisition ever and boost its cloud computing business while shaking up the competitive landscape in cybersecurity.
A deal for Wiz, founded in 2020, could be finalized soon, the Wall Street Journal reported. In early May, Wiz had a $1 billion funding round valuing the startup at $12 billion. It hit $350 million in annual recurring revenue in 2023.
"Wiz is one of the fastest growing start-ups in the cloud security arena and has been positioning itself as a platform provider versus leaders Palo Alto Networks, Zscaler and others," said Shaul Eyal, TD Cowen analyst in a report.
Cloud Battle Versus Amazon, Microsoft
Buying Wiz could boost Google's cloud-computing business, which lags behind Amazon.com unit Amazon Web Services as well as Microsoft. Microsoft has substantial cybersecurity tools but its Azure cloud business has been hit by hacking attacks.
"We believe a strategic deal for Wiz would underscore GCP's (Google Cloud Platform) commitment to multi-cloud and cyber, and ultimately
leverage trust to drive market share gains," said Deutsche Bank analyst Brad Zelnick in a report.
At Oppenheimer, analyst Ittai Kidron said in a report: "With Wiz, Google becomes the leading vendor in the cloud security space and a top 10 vendor in security. While we don't expect a change to Microsoft and AWS strategy in security, we believe the two hyperscalers will be less likely to cooperate with Google/Wiz, opening the market up to other security vendors."
A Google-Wiz deal could face significant regulatory review. The U.S. and European Union have intensified antitrust actions vs. Google and other tech titans in recent years.
Earlier Cybersecurity Acquisitions
In addition, Wiz has been a share taker in a fast growing cybersecurity market — Cloud Native Application Protection Platform (CNAPP) products and services. Bank of America forecasts that the CNAPP market will grow from $7.2 billion in 2023 to $16.3 billion in 2027 — a 24% five-year compound annual growth rate.
Further, Wiz conducts comprehensive assessments of customers entire cloud environment and then correlates a vast number of signals to pinpoint the pathways attackers can and may exploit.
In 2022, Google acquired cybersecurity firm Mandiant for $5.4 billion deal. Also, Mandiant is recognized worldwide for its prowess in detecting and responding to state sponsored computer hacking attacks. Mandiant is part of Google's cloud computing business.
Kevin Mandia, Mandiant's founder, recently left Google to join investment firm Ballistic Ventures as a general partner.
Google in 2022 also bought Siemplify, a threat detection and automated response company, for $500 million.
Google No Longer a Palo Alto Partner?
On the stock market today, GOOGL stock rose 0.8% to close at 186.53.
Google stock has climbed 32% in 2024. Also, Google earnings for the second quarter are due July 23.
A Google-Wiz deal could shift other cybersecurity stocks. "We also note Palo Alto's longstanding strategic partnership with Google and question the added friction/coopetition that would potentially materialize with a (Wiz) deal," Zelnick added.
Oppenheimer's Kidron said: "With Wiz, Google moves from partner to direct competitor for Palo Alto, CrowdStrike and Fortinet."
At William Blair, analyst Jonathan Ho said it remains to be seen how a Google purchase of Wiz would play out. "The deal could allow a very attractive cloud security player like Wiz to be the recipient of significant further investment and marketing leverage by Google," Ho said. "Alternatively, it could be possible that Wiz being acquired by a company that has other areas of endeavor could create an environment of muted focus."
Google Stock: $108 Billion In Cash On Balance Sheet
Meanwhile, CrowdStrike rose 1.6% to 377.37 on Monday amid a broad market rally. Palo Alto stock initially fell, then rose 1.3% to near 341.
Google had previously been tied to takeover talks for marketing software maker HubSpot. HUBS stock plunged last week on a report that negotiations had ended. Cambridge, Mass.-based HubSpot sells sales and marketing software to small and midsize businesses.
As of March 30, Alphabet had over $108 billion in cash and marketable securities on its balance sheet.
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