Alphabet is in discussions to acquire cybersecurity firm Wiz in a deal potentially worth up to $23 billion, according to an anonymous source. If finalized, this would be Alphabet’s largest acquisition to date. However, an agreement has not been reached, and the talks could still fall through.
Neither Alphabet nor Wiz provided comments on the potential deal.
Alphabet’s Acquisition History and Regulatory Scrutiny
Alphabet already owns Mandiant, a cybersecurity firm it acquired for $5.4 billion two years ago, which was its second-largest acquisition after the purchase of Motorola Mobility Holdings LLC in 2012. Acquiring a company as large as Wiz would be unusual for Alphabet and could attract significant antitrust scrutiny. Alphabet is currently facing several antitrust challenges, including a lawsuit from the US Justice Department regarding its dominance in online search and another concerning its digital advertising tools.
Context of the Potential Acquisition
The discussions with Wiz follow Alphabet’s recent decision to shelve efforts to acquire customer relationship management company HubSpot Inc., as reported by Bloomberg News.
Alphabet’s stock has gained over 33% this year, with shares rising about 1% to $186.54 recently.
About Wiz
New York-based Wiz connects to cloud storage providers like Amazon Web Services and Microsoft Azure, scanning data for security risks. Founded in 2020, Wiz was valued at $12 billion during a May funding round that attracted investors such as Andreessen Horowitz, Lightspeed Venture Partners, and Thrive Capital.
Strategic Implications for Alphabet
Acquiring Wiz could help Google compete more effectively with Microsoft and Amazon in the cloud market. Alphabet has been increasing its investment in its cloud customer business, including offering more generative artificial intelligence tools. Despite trailing behind Microsoft and Amazon in cloud computing, Google’s cloud unit has recently reported consecutive profitable quarters after years of losses.
Opportunities in the Cloud and AI Market
The cloud market is growing as more startups migrate their apps and data for generative AI purposes, which require significant compute power to generate content such as images, marketing campaigns, or software code.
Increased Competition with Microsoft
An acquisition of Wiz by Alphabet would intensify competition with Microsoft, the world’s largest seller of cybersecurity products. Microsoft has faced several high-profile hacks, exposing corporate and government customers. A US government report criticized Microsoft for failing to prevent Chinese hackers from accessing the email accounts of US officials.
Google’s Competitive Strategies
Google has been leveraging Microsoft’s cybersecurity failures to persuade corporate and government customers to switch to Google’s productivity software instead of Microsoft Office. In May, Google released a white paper highlighting Microsoft’s security lapses and has considered launching social-media and advertising campaigns on the theme. Google has also offered significant discounts and a free year to government agencies that switch 500 or more users to Google Workspace Enterprise Plus for three years.
In summary, Alphabet’s potential acquisition of Wiz could significantly bolster its position in the cybersecurity and cloud markets while intensifying its rivalry with Microsoft.
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