Google is eyeing security startup Wiz for $23 billion in its biggest-ever acquisition

Google parent company Alphabet is in advanced talks to acquire Wiz, a New York-based cybersecurity startup, in a deal valued at about $23 billion, according to a Wall Street Journal report.

If completed, the transaction amount will be almost twice as high as Google’s record purchase of Motorola Mobility in 2012 for $12.5 billion.

Wiz partners with several cloud providers, including Microsoft and Amazon, and serves clients from Morgan Stanley to DocuSign. The company has 900 employees in the U.S., Europe, Asia, and Israel.

Wiz, which was last valued at $12 billion, would significantly bolster Google’s cloud computing division, which currently lags behind Amazon Web Services and Microsoft Azure, the newspaper wrote.

“There are two advantages to Google acquiring Wiz,” said Ray Wang, principal analyst and founder of Constellation Research. “One, cloud security is hot and allows Google to cut into AWS and Azure customers, and two, owning Wiz would give them a steady, large workload to monetize.”

Google’s acquisition of Wiz will be a game-changer and will strengthen GCP’s credentials and position in cloud security,” said Pareekh Jain, CEO and Principal Analyst at Pareekh Consulting. “GCP has lagged behind AWS and Microsoft in cloud security and this acquisition could create a much-needed differentiator for GCP. There have been a number of cybersecurity incidents in the recent past and strong cloud security credentials can be a differentiator and a deciding factor for enterprises considering moving to the cloud.”

Google’s primary source of revenue has always been online advertising on Google Search, YouTube and other platforms, but the company has long tried to make more money from additional services such as cloud computing and security.

“AI and cybersecurity are the two biggest areas where customers are investing their tech dollars,” Ray said. “Google wants to do both. The bigger problem is that the IPO market is really poor, which has resulted in fewer new enterprise startups and makes existing companies with big revenue streams like Wiz attractive targets even at high valuations.”

Cybersecurity is a strategic and rapidly evolving area for companies like Google and Microsoft as every consumer, business, enterprise and government office connects to the Internet, undergoes digital transformation and is vulnerable to attacks.

“This was the missing piece in Google’s portfolio and helps them provide cybersecurity as a service bundled with their cloud offerings,” said Neil Shah, vice president of research and partner at Counterpart Research. “For AI, this is going to be a double-edged sword—enhancing cybersecurity but also enabling cybersecurity avoidance. This is a big game, and we’re going to see more mergers and acquisitions between cloud, AI, and cybersecurity companies over the next two years.”

Google’s recent acquisitions in the cybersecurity sector include Mandiant for $5.4 billion and Siemplify, though those deals pale in comparison to the potential acquisition of Wiz.

Requests for comment from Google and Wiz remained unanswered.

Google navigates a regulatory minefield

The negotiations come amid heightened antitrust scrutiny from the Biden administration, which has blocked several major mergers across industries.

Google is engaged in ongoing legal battles with the Department of Justice over its dominant position in the search engine market and its advertising practices.

“Through serial acquisitions and antitrust auction manipulation, Google has undermined competition in the online advertising technology marketplace,” the Justice Department said in a memo in its lawsuit against Google.

Ray believes the deal will raise regulatory issues, but Google has reasons to acquire Wiz.

“The current administration would be pretty hostile, but that’s okay because it’s a neighborhood,” Ray added. “They’ll be under a lot of scrutiny, but Google needs to buy revenue and move into new areas beyond search and cloud.”

But recent events have led many to believe the next administration will be more supportive of mergers, Ray added.

Jain noted that the acquisition could face regulatory challenges, as Wiz also partners with other cloud providers, including AWS and Oracle. “Google will have to assure regulators that it will create a level playing field so that customers can use Wiz independently, including with different cloud providers other than GCP,” Jain said.

But Ray believes the biggest obstacles are that solutions like Google Cloud and AI could give them an unfair competitive advantage over traditional players like Palo Alto, ZScaler, and CrowdStrike.

The outcome of the negotiations remains uncertain, but if successful, the acquisition would represent a significant milestone in Google’s efforts to expand its cloud computing capabilities and enhance its cybersecurity offerings.