Alphabet Inc.’s GOOGL Google on Thursday announced that it plans to acquire cloud software company Apigee Corp to strengthen its cloud platform. The deal is valued at $17.40 per share in cash or about $625 million.
San Jose-based Apigee is a provider of application programming interface (API) management tools. APIs help software applications to interact with each other and share information. Now-a-days these APIs have become very important in building any app that runs on the cloud.
Apigee’s software helps companies' digital services to interact with apps used by customers and partners, thereby offering a complete solution for moving business to the digital world. Its software is used by many companies, including customers like AT&T, Burberry Group Plc, Vodafone Group Plc and the World Bank.
The Apigee deal comes on the heels after Google announced its partnership with Box, Inc. BOX to bring Google Docs, Google Springboard and Box’s productivity features on a single platform, facilitating a seamless work experience on the cloud.
Deal Rationale
Cloud computing requires companies to run their applications and users to interact with data and applications on the cloud. This requires a lot of paradigm shifting because there is a sense of loss of control over data that you could previously capture in a device. The ability to help businesses create seamless transition to cloud is what Google appears to be targeting with its Apigee buy.
With this acquisition, Google expects a boost in its enterprise cloud strategy as it will now be able to offer a comprehensive API management tool to help companies conduct flawless media processing and workflows on the cloud. This in turn should help it win enterprise clients because it will be able to offer the companies the requisite APIs to be implemented and published on the cloud.
Bottom Line
Google is a rather late entry into this fast-growing highly-competitive cloud market but has developed rapidly over the last few years. This deal appears to be yet another attempt by Google to keep its position in the enterprise computing race.
Competition in this space is building up quickly as big companies are increasingly shifting their computing operations to cloud. Amazon AMZN is already in good control while Microsoft MSFT is taking all the right steps to boost its position.
It would be interesting to see how the competitive atmosphere builds up with Google’s new move to get a share of this rapidly growing space.
At present, Google has a Zacks Rank #3 (Hold).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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