Alphabet (GOOG, GOOGL) is in talks to acquire cyber security startup Wiz for $23 billion, according to a report from the Wall Street Journal.
Jefferies senior analyst Brent Thill joins Market Domination Overtime to give insight into the movements in big tech, the cloud space, and why he believes this merger will be a successful one for Alphabet.
Thill is excited by this deal, stating: “I think this makes a lot more sense given that they [Wiz] can address both small, mid, and large enterprises with this technology. That the government–there’s zero chance, in my opinion, they could push back on this because it’s enabling the security and safety of data, and no one has dominant market share, so it makes a lot of sense for us. So, again, we’ve heard a lot of chatter, and M&A by Google. None of it’s happened, clearly, the HubSpot deal, at least in the interim, fell apart. But this deal, in my opinion, makes a lot more sense. I’d be a lot more excited as a shareholder if this was happening. “
For more expert insight and the latest market action, click here to watch this full episode of Market Domination Overtime.
This post was written by Nicholas Jacobino
Video Transcript
Google parent Alphabet reportedly nearing a deal to acquire cyber security start up Wiz.
That’s according to the Wall Street Journal, the groundbreaking $23 billion deal would be the largest acquisition for the company for more on what alphabet’s move in the cloud.
Cyber security space could mean for big tech.
Let’s get to Jeffrey, senior analyst Brent who’s joining us now to discuss Brent.
It’s good to see you.
So obviously, this would be a big deal, um a big deal at a time when big deals are scrutinized by Washington.
So why is it so appealing that alphabet might be considering this even in the face of that perhaps scrutiny?
Yes, security is number one and Google right now effectively is trying to get bigger trust with larger enterprises and small and mid size enterprises.
So Wiz would effectively help build their credibility in in ensuring your data is secure uh in the cloud.
And that again remains the top cio priority.
Uh If you recall, they were uh effectively in the hunt for hubspot, which we never thought made a lot of sense given it’s an application company, they’re not really in the app space they are on Amazon Aws.
There were a bunch of other considerations in this situation.
I think that they can make the case that uh there is precedent.
If you look at PTA networks, uh $100 billion plus market cap, uh cloud flare, there are a lot of cyber names that have inherently higher market caps.
If Wiz continued on this trajectory, uh you know, certainly you, you could, you could start to look out four or five years, could, could the company independently have this type of multiple.
So I think uh relatively speaking, other cyber names, uh We’re at that valuation and they could uh from a uh a perspective on the financials could make that actually work pretty well.
Um So I, I was not a fan of the hubspot transaction uh potential.
I think this makes a lot more sense given uh that they can address both small, mid and large enterprises with this technology.
Uh The, the government, there’s zero chance, in my opinion, they could push back on this because it’s enabling the security and safety of data.
Uh And, and no one has dominant market share.
Uh So it would make a lot of sense for us.
So, uh again, we’re uh we’ve heard a lot of chatter uh and M and A by Google, none of it’s happened.
Uh Clearly the hubspot deal uh at least in the interim fell apart.
But this deal, in my opinion makes a lot more sense.
I would, I’d be a lot more excited as a shareholder if this was happening, Brent.
I also want to get your take kind of broadly on the software sector and what you see ahead in the back half.
How optimistic are you, Brent?
I asked.
And we had a, another financial analyst on the show earlier.
Is that a relatively more, more cautious on software?
Where are you at?
I’m more excited because everyone hates software right now.
I’ve said this, II, I feel like I’m uh I’m changing oil underneath uh with no daylight and, you know, I, I it’s been a tough, tough front half of the year.
So I think the sentiment is awful.
Most of our big institutional investors are underweight software.
Everyone is in hardware semis A I infrastructure.
So I’m actually gonna take the other side of this, which is, I think that right now everyone is so negative and I haven’t seen this in my career for, for as long as I’ve done this and how negative it is.
So what when you think about the sentiment and the setup, uh it just feels, it feels really bad and as they say, invest in uh with uh with fear and, and sell with greed and right now we got a lot of fear.
So I, I think it’s go time.
Uh The IGV has been slowly making its way back up against the semi names.
Uh Again, I don’t, I’m not expecting a breakout.
But if, if companies actually maintain or even cut out a little bit de risk, the guy that starts to look at 25 multiples come in, you start to see more M and A Trump gets in office and M and A comes back.
I mean, my, my view is like, it’s, it’s more constructive for software just given how negative everyone is.
I can’t imagine it getting more negative unless companies have to cut numbers by like 20%.
I don’t see that, but we just had workday sales force.
A number of companies cut numbers.
So I’m, I’m actually moderately more constructive because I think a lot of the bad news is already in the stocks.
