Kulkarni, who has a Buy rating and $3,375 price target on Alphabetshares, writes that the deal exceeds Google’s recent deals for analytics firm Looker and Fitbit, among others.
“We believe the Big Three Public Cloud vendors are increasingly focused beyond traditional Internet Infrastructure offerings,” he wrote. “Google’s recent couple of big acquisitions has been steadily building its offerings beyond traditional products e.g. Looker in business analytics and Mandiantin cybersecurity.”
Kulkarni writes that as machine learning and artificial intelligence adoption drive incremental cloud adoption, the big three—meaning Amazon.com(AMZN), Microsoft(MSFT), and Alphabet—will look to expand their product or functional footprint through deals.
Kulkarni notes that M&A in the tech space has heated up in recent months, pointing to recent deals for Zynga(ZNGA), Activision Blizzard(ATVI), Tower Semiconductor(TSEM) and Citrix Systems(CTXS).
“And, we believe ongoing market correction likely accelerates this trend with cash-rich mega-caps viewing assets priced more attractively today,” Kulkarni writes.
RBC Capital Markets analyst Matthew Hedberg wrote Tuesday that he’s bullish on the cyber-security industry. He sees the deal as a bold move for Google to differentiate itself and shine brighter as the Russia-Ukraine situation shines a light on cybersecurity risks.
“While we don’t believe this necessarily forces other large technology vendors to follow suit with a large cyber-security acquisition in the short-term, we believe it further illustrates the importance of cyber-security in a cloud-first world and expect both large and small technology vendors to continue to invest (both organically and inorganically) to take advantage of strong market tailwinds,” Hedberg writes.
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