Alphabet has made a massive move into the exciting cyber security space after sealing a deal to buy Nasdaq-listed specialist Mandiant Security, beating out Microsoft in a hotly contested battle, according to analysts.
The deal, priced at $23 a share, will see Alphabet pay $5.4 billion for Mandiant, a 19% premium to Mandiant’s previous share price.
It’s a big deal for Alphabet, its second largest ever, and will significantly bolster its Google Security arm in terms of intellectual property and development plus the range of services it can offer through its Google Cloud platform.
‘The deal illustrates the importance of cyber security and the price that you have to pay for it,’ said Stifel analyst George O’Connor. Alphabet is paying 8.2-times Mandiant’s expected sales this year.
LAYING DOWN CLOUD GAUNTLET
Mandiant will help Alphabet challenge the dominance of Microsoft in Cloud security. By folding it in with its Chronicle product range, it will make Google Security a clear number two against Microsoft’s Azure Sentinel, according to Megabuyte analysts.
‘This is a clear shot across the bow from Alphabet to Microsoft which has, with its Azure Sentinel offering, dominated the hyperscaler Cloud security space for several years now,’ said Indraneel Arampatta of Megabuyte.
‘We estimate Mandiant’s $562 million of revenue expected this year will be a circa 15% to 20% uplift to Alphabet revenues,’ said Arampatta.
The business model offers room for automation to gain scale from the offer, with Alphabet aiming to offer a more complete end-to-end service encompassing a security operations suite and advisory services.
CYBER SECURITY M&A RAMPANT
The cyber security space continues to grow rapidly and M&A has been rampant during 2021 and into early 2022, with the likes of IBM and Deloitte joining industry specialists like Zscaler, Check Point, Palo Alto and the UK’s Sophos and GB Group (GBG:AIM) spending vast sums.
The first three quarters of 2021 saw a record 151 transactions in the industry, according to 451 Research, up from 94 for the same period in 2020.
Microsoft has committed to spending $20 billion in security research and development over the next five years, dwarfing the R&D spend of any specialist security players.
Alphabet has lagged behind but that may now be changing. In January 2022 it paid $500 million for Israel-based cybersecurity start-up Siemplify as it attempts to build out its own ecosystem to match that of its hyperscale Cloud rivals.
‘As we’ve seen with Microsoft - build it and the partners will flock - and Google may be trying to replicate some of that same success with its own security proposition,’ said Megabuyte’s Arampatta.
