Google to buy cybersecurity firm Wiz for $32 billion in the biggest deal in company's history
FILE - Sundar Pichai, CEO of Google and Alphabet, takes part in a discussion at the Asia-Pacific Economic Cooperation (APEC) CEO Summit Nov. 16, 2023, in San Francisco. (AP Photo/Eric Risberg, File) ·Associated Press Finance·ASSOCIATED PRESS
SAN FRANCISCO (AP) — Google has struck a deal to buy cybersecurity firm Wiz for $32 billion in what would be the tech giant's biggest-ever acquisition at the same time it's facing a potential breakup of its internet empire.
The proposed takeover announced Tuesday is part of Google's aggressive expansion into cloud computing during an artificial intelligence boom. The frenzy is driving demand for data centers that provide the computing power for AI technology and intensifying the competition in that space among Google and two other tech powerhouses, Microsoft and Amazon.
If the all-cash transaction is approved by regulators, Wiz will join Google Cloud — an increasingly important part of its business separate from the search and advertising operations that account for most of the $350 billion annual revenue at Google's parent company, Alphabet.
With the advent of AI, however, the cloud division has become a rising star at Google. Annual revenue in the division was $26.3 billion in 2022, and soared 64% to $43.2 billion last year.
Wiz, a five-year-old startup founded by four longtime friends who met in the Israeli army when they were still teenagers, is on track for an estimated $1 billion in revenue this year. After getting its start in Israel in 2020, Wiz now oversees an operation that makes security tools protecting the information stored in data centers from its current headquarters in New York.
“Wiz and Google Cloud are both fueled by the belief that cloud security needs to be easier, more accessible, more intelligent, and democratized, so more organizations can adopt and use cloud and AI securely,” Wiz CEO Assaf Rappaport wrote in a blog post.
In a Tuesday conference call, Google CEO Sundar Pichai predicted Cloud division's addition of Wiz will result in even better security at a lower cost than can be provided now. That prediction may have been aimed as much at regulators likely to scrutinize how the deal will affect competition and pricing, as much as at prospective customers.
Google had been courting Wiz for some time before finally settling on a price that's much richer than a reported $23 billion bid that was rejected last July. At that time, Wiz signaled it would instead pivot back to a previously-planned initial public offering. But recent volatility in the stock market has chilled the IPO market, and now Rappaport said Wiz expects to “innovate even faster” by becoming a part of Google.
Wedbush analysts called Google's move to buy Wiz “a shot across the bow” at other tech giants, particularly Microsoft and Amazon, who have already made big bets on cyber security as the fight to dominate cloud computing intensifies. Google had fallen behind its competition in the cloud space, Wedbush said, but the acquisition of Wiz could alter the parameters.
The bid Tuesday easily eclipses the current largest acquisition in Google's 26-year history — a $12.5 billion takeover of Motorola Mobility in 2012 that didn’t pay off the way that the Mountain View, California, company had hoped. The $32 billion purchase of Wiz would also go down at the biggest-ever cybersecurity acquisition and rank among the 20 most expensive takeovers of a software company in history, according to Mergermarket, a financial intelligence service.
As often happens with high-priced acquisitions, investors reacted coolly to Tuesday's news as Alphabet's shares fell 3% during afternoon trading.
Some of Google's other acquisitions have turned into gold mines, most notably its $1.76 billion purchase of online video pioneer YouTube in 2006 and its $3.1 billion takeover of advertising technology platform DoubleClick in 2008. A $5.4 billion purchase of another security firm, Mandiant, in 2022 also helped fuel the recent growth of Google's Cloud division, which posted an operating profit of $6.1 billion last year.
Google's DoubleClick deal is now part of an antitrust case filed by the U.S. Justice Department targeting Google’s technology for distributing ads across the internet. A ruling in that case, involving allegations that Google illegally abused its power to manipulate digital ad prices, is expected this year.
Regulators in the U.S. and abroad are targeting Google on other fronts, too.
Last year, a federal judge in another case brought by the Justice Department last year concluded Google had turned its ubiquitous search engine into an illegal monopoly. The penalization phase of that trial begins next month.
The Justice Department is seeking a rebuke that would include a requirement for Google to sell its Chrome web browser and would ban the company from making agreements with Apple and other companies to make its search engine the default tool for finding online information on the iPhone and other devices.
The Wiz deal will also get a close look from antitrust regulators. While many expect the Trump administration to be more friendly to business deals, it has also shown itself to be leery of big tech.
The Wiz deal raises antitrust concerns due to the potential impact on standalone cyber security vendors, as well as potential disruption for bigger rivals. Still, Wedbush's analysts note the industry is “ripe for consolidation” — which could pose "massive growth opportunities on the horizon heading into this AI Revolution.”
Antitrust worries were also believed among the reasons Wiz called off sales talks with Google last year while President Joe Biden's administration was seeking to block a variety of tech deals. Agreeing to a sale now indicates both Google and Wiz are more confident the deal will gain U.S. approval under the Trump administration, Mergermarket analysts Kevin Ketcham and Kevin McCaffrey wrote in a Tuesday note.
“The two sides likely wouldn’t have struck the deal if they didn’t at least see a potential path to closing,” Ketcham and McCaffrey wrote.
If they get the regulatory greenlight and meet several conditions spelled out in their agreement, Google and Wiz expect the deal to close in 2026.
