Google’s $32B acquisition of Wiz | Shimmy Says Ep 7

Hey everyone, it's Alan Shimel, and this is another episode of Shimmy Says, you know, I'm really excited to do, shimmy says this week, because we actually have a story that's not necessarily AI related. AI takes up so much of our headspace these days, whether it's generative ai, agentic ai, or what have you. But today I want to talk about just good old fashioned, hard earned, good green cash, like in $32 billion worth of cash.

You know, the big story this week was that Google coughed up 32 billion. That's with a b billion dollars to buy the Israeli, uh, security startup, the Wiz. Now, couple of things, if you're not in the security space, you may not know The Wiz.

The Wiz, uh, originally founded, I believe in 2020, so just five years old. Grew really quickly. You know, they came out during covid, which they'll even admit, probably helped them to get some traction early on, and they got to a hundred million dollars in annual reoccurring revenue really quickly.

I think they're up close to six or 700 million in reoccurring rev annual reoccurring revenue right now. Um, what do they do in security? Well, they've made a few acquisitions, which has expanded their portfolio, but basically their cloud security, cloud security, uh, CA cloud native security, uh, they do do some SOM software, bill and materials, supply chain kind of stuff in the DevSecOps space a little bit via, uh, an acquisition they made.

Um, but it, it's more generalist cloud security. But they did a really good job. I think also what they did really well was they, they really made inroads working with the public cloud providers, all three of the major ones here in the west, uh, AWS Google and Microsoft Azure, their AWS marketplace product is probably one of the biggest drivers of revenue for them.

So, you know, a real poster child for that kind of success now, and that very success with the cloud providers is sort of what helped with, uh, making them as attractive to Google. Uh, and, and make no mistake, this is Google Cloud is, you know, as much as Google, uh, they wanted that strong cloud security product in their, in their portfolio. Now, were they better off buying it for $32 billion or just partnering?

Well, that's a question one might ask, but clearly they wanted it. For those who may not have been following this story, Google offered them $23 billion, oh, maybe six or eight months ago. And there were rumors that that deal was getting done, and then the Wiz turned it down, they walked away from the altar, they walked away from $23 billion only to come back here at 32 billion just six or eight months later.

Why did they take 32 now and they didn't take 23 before? It's a good question. Well, first of all, you don't have to be a mathematician and know that it's an extra $9 billion and you know, a billion here, a billionaire, before you know it, you're talking about real money.

So $9 billion is maybe reason enough. But on top of that, I think the world was different six or eight months ago, I think the stock market was up, interest rates were coming down, inflation's coming down the market for IPOs look like it might pop. And I think what we've had over the last, you know, month or two months, certainly here in the US has been a lot of uncertainty and businesses do not like uncertainty.

So with this uncertainty, the market has reacted. We're seeing inflation in up, we're seeing unemployment, interest rate pressures, all of the above. And so that money started looking better and better.

Also, from what I've read, Google has been pretty much in constant communication. The corp dev team has been in constant communication with the folks at the Wiz talking, continuing the dialogue, not giving up on this deal, and they sweetened it to 32 billion. And, and that, I guess, you know, they say every man has its price.

So does every company. I mentioned early on the Wizards and Israeli based startup, it's actually three co-founders, and this isn't their first startup. They sold a, a security, I think, cloud security startup to Microsoft prior to starting the Wiz, maybe in 2017 or 2018 for about $320 million.

So they've made great liquid liquidity events in the past. Of course, this one pales in comparison to Comp Compare. Speaking of comparison, $32 billion based on their present run rate and revenue is about 45 times revenue.

45 times revenues a lot. That's a huge, huge multiple. To give you a little context, last year, or maybe it was the year before Cisco bought Splunk, and Splunk is a great company, public company.

Cisco bought Splunk for I think $27 billion, and that represented about seven, seven and a half times revenue or value. So you could, I mean, the difference between seven or seven and a half times to 42 times revenue, that's, it's not even in the same universe. And, you know, people thought Splunk wasn't bought cheap, so certainly the Wiz wasn't bought cheap.

Now, I mentioned before Google bought 'em to be in cloud security. Did Google buy them to, to deprive their biggest competitors, AWS and Microsoft Azure of using the Wiz? Or do they expect AWS and Microsoft to continue using the Wiz and contribute to Google's bottom line?

I, I don't, I'm not quite sure what the answer there is. You know, as a security partner, Wiz had NDA and access to roadmap and feature sets with, with AWS and Microsoft, and I'm not sure those companies are gonna be comfortable with knowing that Google is their parent company going forward. It's gonna be interesting to see if Google and the Wiz is able to still maintain their relationships with AWS and the Azure folks, uh, Azure folks at Microsoft or do AWS and Microsoft sort of shun them, push 'em away and, and start looking at other, other products.

You know, if, if that happens and the Wiz loses a lot of their revenue base based upon that, is that still, you know, how's that look for Google at $32 billion out the door? I think that's gonna be the biggest question we need to watch going forward. Do do the other cloud providers still have Wiz as sort of a favorite partner, if you will?

Another thing to think about is, hey, Google had $32 billion laying around to just spend on this, and they've got a lot more, you know, all of the tech hyperscalers, all the giant tech giants are sitting on literally barrels full of cash and they're just waiting for the right things to buy. Whether it's an AI related thing, maybe it'll be Quantum or in this case security. Um, but that's an awful lot of money to have laying around $32 billion.

Who else does this affect? I mentioned the cloud providers, but we also have companies like Palo Alto. Look, Palo Alto is probably the W's biggest competitor, and this could go one of two ways for them, right?

Does the Wiz with Google behind them kind of really dominate Palo Alto because they have deeper pockets and broader distribution, or do does AWS and Microsoft is yours? Say, Hey, maybe we should shift to Palo Alto more. Maybe there's a tremendous opportunity for Palo Alto to pick up business from companies who don't want to deal with a Google owned wiz.

Another interesting thing that I think we'll have to see how that plays out. I should mention that though, this is an all cash deal. It is not consummated yet, right?

It'll have to be approved. I imagine the EU maybe even more than the US will have some, uh, antitrust, uh, review process in place. Interestingly, if for some reason this deal doesn't happen because of regulatory or another reason, there is a 3 billion, that's 3 billion with a BA $3 billion, uh, breakup fee involved in the deal.

So if this deal doesn't happen and w doesn't, you know, join Google, they still wind up with $3 billion of Google's money. Um, as someone who's been in the security industry for going on 30 years. Now, I gotta tell you, at, at some level, I am thrilled to see that security is valued this much, that someone would pay 45 times revenue, $32 billion in cash for a security company.

That's a long way, long, long way away. I remember the first big security, uh, m and a deal I saw was ISS being bought by IBM and I wanna say that was for a couple of hundred million dollars and everyone thought, I think ISS had 60 or $70 million in reoccurring revenue. And, you know, it was a little under 10 times revenue.

I think they paid for it and we thought that was just crazy. And who would pay that much for a security company? Congratulations to the Wiz and their founders and their, all their employees there.

This is really a, a high watermark, I think to this point for security companies and it bodes well for the rest of the security companies out there. You know, we're coming in RSA season, we'll be seeing more and more security. Uh, we'll see if this sets off a whole frenzy of m and a and security and tech in general.

But until next time though, hey man, $32 billion in, in cash. That's a big, that's a big number. Congratulations.

This is Shimmy. We'll see you next week on Shimmy Says.