The Wall Street Journal reported over the weekend that Google parent Alphabet (NASDAQ:GOOGL) is in advanced negotiations to purchase cybersecurity startup Wiz for around $23 billion. If finalized, this would mark Alphabet's largest acquisition to date.
The deal could be closed soon, provided the discussions remain on track, the report added.
According to Citi analysts, the acquisition, if accurate, “would be one of the largest, most marquee strategic deals in enterprise cybersecurity, and even software at-large.”
“We didn’t see this coming,” they commented on the reports of the deal.
The analysts believe that the high valuation reflects an assertive bet on cybersecurity as the preferred “enterprise-grade” branding route, providing a clear path to capturing enterprise mind and market share.
They also view it as a significant vote of confidence in Wiz’s multi-cloud-supporting CNAPP, which is expected to play a crucial role in the next wave of network transformations, SecOps prioritizations, and, importantly, public cloud migrations.
“We believe Wiz stands to galvanize Google’s cyber brand for both customers and reseller/distribution ecosystems and where Wiz’s recent hiring of Zscaler’s ex-CRO into its C-Suite also enhances the presumed “enterprise gravitas” and enterprise go-to-market credibility angles.”
If the transaction is completed, the competitive implications would be most advantageous for CrowdStrike (NASDAQ:CRWD) and Palo Alto Networks (NASDAQ:PANW), as they could benefit from the disruption caused by a lack of vendor neutrality, Citi noted.
The impact is expected to be mixed for Zscaler (NASDAQ:ZS) and Check Point Software (NASDAQ:CHKP), given their less mature CNAPP portfolios.
Conversely, the transaction could pose the greatest challenges for smaller and mid-sized CNAPP players such as Fortinet (NASDAQ:FTNT), SentinelOne (NYSE:S), and Rapid7 (NASDAQ:RPD).
“We are also keenly observing how the 6-year old, now ~10- figure PANW/Google partnership will evolve given likelihood of competitive encroachment between PANW’s Prisma Cloud and Wiz, where PANW has consistently cited aggressive pricing behavior instigated by the latter,” analysts concluded.
