The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

By Jennifer Saba

NEW YORK, March 18 (Reuters Breakingviews) - Google’s yellow-brick road might be a path to nowhere. The search giant on Tuesday agreed to buy cybersecurity platform Wiz for $32 billion. It may help boss Sundar Pichai in his battle for the cloud, but the journey is riddled with potholes.

Parent Alphabet GOOGL.O is paying in cash to buy the startup backed by Blackstone BX.N, Andreessen Horowitz and Sequoia Capital. It was a hard-fought agreement. Back in the middle of last year, the technology goliath offered $23 billion for Wiz, according to the Wall Street Journal, which would already have made it Google’s largest acquisition. Talks collapsed in part over concerns that hostile trustbusters under President Joe Biden would nix any tie-up.

The companies may feel emboldened by new President Donald Trump’s self-professed love of deals. The basic rationale at least makes sense. Google is a distant third place in selling services to crunch data across its fleet of servers, trailing Microsoft MSFT.O and Amazon.com AMZN.O. Yet high-profile hacks have made governments and businesses antsy to better safeguard these processes. Wiz’s secret sauce is that it tries to flag and catch nefarious activity before it happens. By combining, Google can differentiate itself from its rivals in a way customers care about.

This simple story is complicated by the financial reality. Granted, privately held Wiz may be growing faster than competitors, with the company touting that it expects to hit $1 billion in recurring revenue in 2025, according to CNBC, up from $500 million last year. It was eyeing an initial public offering after prior talks fizzled, only to reengage after hiring Goldman Sachs as an advisor. Yet the original mooted price tag was already expensive; adding an extra $9 billion makes it even more so. The deal values the target’s enterprise at 32 times its sales goal. Peers Datadog DDOG.O, Snowflake SNOW.N and Crowdstrike CRWD.O trade at 9 times, 10 times and 17 times expected recurring revenue, respectively, according to Visible Alpha.

Worse, there is no guarantee that a Trump administration will be friendlier. The Department of Justice continues to pursue Alphabet in court over anticompetitive behavior. The Federal Communications Commission is eyeing YouTube for allegedly discriminating against faith-based channels. Google plans to continue offering Wiz to peers like Amazon and Microsoft, potentially a way to defuse criticism. But that the seller pushed for a fee equivalent to 10% of the deal price if regulators balk, according to the Financial Times, suggests serious doubt. Google may end up stumbling on its way down the road.

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CONTEXT NEWS

Alphabet’s Google announced on March 18 that it had agreed to buy privately held cloud security platform Wiz for $32 billion in cash. The transaction is Google’s largest.

Google held talks to acquire Wiz at a $23 billion valuation in mid-2024, the Wall Street Journal reported at the time.

(Editing by Jonathan Guilford, Pranav Kiran and Maya Nandhini)

((For previous columns by the author, Reuters customers can click on SABA/jennifer.saba@thomsonreuters.com))