8 Companies Amazon, Microsoft, and Google Could Buy in the Tech Slump – Business Insider - eComEmpireStore + Brought to You By: Robert Villapane Ramos

8 Companies Amazon, Microsoft, and Google Could Buy in the Tech Slump – Business Insider

While the market downturn has many companies spooked, there may be a silver lining for Amazon’s, Microsoft’s, and Google’s cloud businesses.As the valuations of their smaller cloud and software peers have taken a hit, the so-called Big Three cloud providers can now buy those firms at lower prices, analysts told Insider. That means Amazon Web […]

While the market downturn has many companies spooked, there may be a silver lining for Amazon’s, Microsoft’s, and Google’s cloud businesses.
As the valuations of their smaller cloud and software peers have taken a hit, the so-called Big Three cloud providers can now buy those firms at lower prices, analysts told Insider. That means Amazon Web Services, Microsoft Azure, and Google Cloud could be poised for a merger-and-acquisition spree. Popular targets include industries like entertainment for AWS, gaming and cybersecurity for Microsoft, and cloud computing for Google, analysts said.
The three cloud giants are no strangers to snapping up firms: Recent notable acquisitions include Google Cloud’s $5.4 million purchase of the cybersecurity firm Mandiant in March, Amazon’s acquisition of the encrypted-messaging app Wickr in June 2021, and Microsoft’s $500 million purchase of the cybersecurity-software maker RiskIQ in July 2021.
Mark Moerdler and Mark Shmulik, two analysts at the financial firm Bernstein, analyzed Amazon’s, Microsoft’s, and Google’s acquisitions from January 2018 to August 2021 in a recent research note. They found Microsoft was the biggest acquirer of the Big Three, even when excluding its $17 billion purchase of the artificial-intelligence company Nuance. Microsoft acquired 41 companies and spent $38 billion in that time frame, while Amazon acquired 25 companies and spent $13 billion, and Google’s parent company, Alphabet, acquired 33 companies and spent $7 billion.
Despite the favorable conditions for dealmaking, analysts said larger regulatory concerns could impede any blockbuster acquisitions. For example, Moerdler and Shmulik said they suspected Google passed on acquiring VMware, which the chip giant Broadcom in May announced it would buy for $61 billion, because of regulatory concerns.
Still, in a tough macroeconomic climate, larger and more well-resourced companies typically look to acquire firms that may be looking for a lifeline. Lower valuations drive companies to consider getting bought, especially those that are running low on cash, Moerdler and Shmulik said.
By Bernstein’s count, Amazon spent the most on entertainment, with $8.45 billion going toward its purchase of MGM Studios last year. Six of the firms it bought were cloud-related, though the deal sizes were relatively small and totaled less than $1 billion.
That’s because Amazon needs to invest in content to ensure that its Prime shopping membership, which includes entertainment streaming, remains useful to consumers, Moerdler and Shmulik said.
As for cloud acquisitions, analysts said Amazon’s cloud unit didn’t often buy companies. It usually prefers to build cloud technology in-house, and the depth and breadth of Amazon’s cloud technologies means it doesn’t need an aggressive M&A strategy to stay on top.
Entertainment: Roku
Amazon could add to its entertainment portfolio by buying the streaming-device company Roku, Tom Forte, an analyst at the investment company D.A. Davidson, wrote in a recent research note.
Roku’s device is a competitor to Amazon’s Fire TV products, and the company is creating its own streaming content.
With regulatory scrutiny of big mergers ramping up, however, a deal of Roku’s magnitude isn’t likely, Forte said. Roku has a market cap of over $9 billion.
Health and pharmacy: Express Scripts

Amy Bricker

Amy Bricker, Express Scripts’ president.
Express Scripts

Amazon has also demonstrated interest in the health and pharmacy sectors, huge industries it could link to its delivery business.
It bought the pharmacy startup PillPack for $753 million in 2018 and announced plans in July to purchase the primary-care firm One Medical for $3.9 billion. The company shut down its fledgling medical-care business, Amazon Care, soon after.
Moerdler and Shmulik said Amazon’s One Medical deal signaled its acquisition focus was on healthcare and cloud and that “the company’s wallet is open, and it is ready to go discount shopping.”
So to keep building out its health acquisitions, Amazon might buy the prescriptions company Express Scripts, Michael Pachter, a managing director at the investment firm Wedbush Securities, previously told Insider. Express Scripts is a provider of mail-order prescriptions to insurance providers and employers, and such a large network could greatly expand Amazon’s reach. 
Many of Microsoft’s purchases from 2018 to mid-2021 were in cloud-related and software technologies, Moerdler and Shmulik found, and those buys directly added capabilities to its Azure cloud platform.
Most were small acquisitions, like the data-security company BlueTalon, a roughly 50-person firm Microsoft purchased in 2019 for an undisclosed amount.
As Microsoft tries to overtake AWS, the cloud-industry leader, Moerdler and Shmulik expect that it will continue investing most heavily in cloud-related firms, including those that add to its software capabilities, they said.
But there are other areas, the Bernstein analysts said, in which Microsoft has shown interest, such as 5G, the next-generation telecommunications network. It’s possible that Microsoft wants to offer its own 5G services, likely in partnership with a telecom provider.
Telecom and 5G: Alef Edge
Analysts predict 5G, which is deeply tied to cloud computing, will become the backbone of many products and services — and Microsoft wants to get in on the opportunity.
That’s why it could buy a company like Alef Edge, which helps developers build 5G edge services with its platform EdgeNet. Edge services process data closer to the source, instead of at a faraway server. The startup has raised $40.39 million, according to PitchBook, and does not disclose its valuation.
Larry Carvalho, an analyst at the strategy firm Robust Cloud, previously told Insider that Alef Edge was “future-looking in terms of building applications on the edge” and could be an acquisition target for a cloud giant like Microsoft.
Cybersecurity: Okta

Todd McKinnon, Okta

Okta CEO Todd McKinnon.
Todd McKinnon

Microsoft purchased just one cybersecurity firm between 2018 and mid-2021, but the company could be “investing aggressively” in the area soon, Moerdler and Shmulik said. Cybersecurity has been a greater focus for Microsoft, AWS, and Google Cloud after the hack of the IT-software company SolarWinds in 2020.
Rishi Jaluria, a D.A. Davidson analyst, previously told Insider Microsoft could acquire the identity- and security-software maker Okta, whose business boomed earlier in the pandemic. While Microsoft has its own identity software, he said Okta’s product was more robust and popular among developers.
“I think it would give Microsoft a stronger presence in security than they have today,” Jaluria said.
Artificial intelligence: OctoML
After its blockbuster acquisition of the artificial-intelligence company Nuance, Moerdler and Shmulik consider AI a core area of acquisition focus for Microsoft. 
OctoML, a startup that focuses on helping businesses make use of machine-learning models, could enhance Microsoft’s AI capabilities, Maribel Lopez, a Lopez Research analyst, previously told Insider. Customers using Microsoft’s cloud could then more easily tap into their machine-learning models, Lopez added.
“You’re already going to put your stuff in Azure, so if you’re doing that, then why wouldn’t you do all of your machine-learning-operations pipeline,” she said.
The Seattle startup was valued at $850 million as of 2021, according to PitchBook.
Gaming: Unity

Unity Technologies CEO John Riccitiello speaks onstage during Day 1 of TechCrunch Disrupt SF 2018 at Moscone Center on September 5, 2018 in San Francisco, California.

Unity Technologies CEO John Riccitiello.
Steve Jennings/Getty Images for TechCrunch

Moerdler and Shmulik predicted Microsoft would acquire a gaming studio, partly because it would encourage purchases of the Xbox Game Pass, a subscription plan that provides access to a catalog of games.
Microsoft could look to Unity, which has an about $10.9 billion market capitalization, to add to its growing portfolio in gaming, Jim Lundy, an Aragon Research analyst, said, adding: “The race is to buy up all the other gaming platforms.”
Acquisitions in the gaming space could also add to Microsoft’s metaverse ambitions.
Analysts point to Microsoft’s planned $68.7 billion acquisition of the video-game publisher Activision Blizzard as the first step in a longer play for revolutionizing the way companies work. Activision “tipped the hand” for Microsoft to go big on a virtual world that hosts business applications, Dan Ives, a Wedbush analyst, told Insider.
Cloud was the biggest area of M&A focus for Google from 2018 to mid-2021, Moerdler and Shmulik found, and they expect it to continue to invest in cloud-based companies. Purchasing companies is a faster way for Google to build a broader set of cloud capabilities to compete with AWS and Microsoft, the analysts said.
Google made 12 cloud-related acquisitions, worth about $4.5 billion, during that time as it aimed to catch up with AWS and Microsoft Azure in cloud market share.
In 2019, Google purchased the data-analytics company Looker for $2.6 billion in cash under Google Cloud CEO Thomas Kurian. The deal was meant to give Google Cloud an edge over AWS and Microsoft Azure because of Looker’s large business customers and its enterprise features in data visualization and AI.
With Kurian at the helm, bringing with him the Oracle acquisition playbook, Google Cloud may now have a bigger M&A appetite.
“That’s something Oracle did a lot of,” Lopez previously told Insider. “It’s finding the right acquisitions and making sure you’re building a portfolio for the next generation of services, not trying to recreate things that have already been done incrementally.”
Cloud: Workday

Pictured: Aneel Bhusri, CEO of Workday, in an interview on September 17, 2015 -- (Photo by: )

Workday co-CEO Aneel Bhusri.
Mark Neuling/CNBC/NBCU Photo Bank via Getty Images

Google could buy the cloud-based finance and human-resources firm Workday to bolster its cloud offerings, Dan Morgan, a trust-portfolio senior manager at the financial firm Synovus, previously told Insider.
Workday has global enterprise customers and is growing in its sector, Morgan said. That makes it a good fit for Google as it aims to add to its enterprise credibility.
But with Workday’s nearly $44 billion market cap and regulatory scrutiny on the rise, it would be a reach for Google to make such a deal happen.
Cybersecurity: Palo Alto Networks

Nikesh Arora, CEO of Palo Alto Networks

Palo Alto Networks CEO Nikesh Arora.
KAZUHIRO NOGI/AFP via Getty Images

Google may also be hoping to differentiate itself from AWS and Microsoft Azure in cybersecurity, Moerdler and Shmulik said. It acquired the cybersecurity firm Mandiant for $5.4 billion in March and is adding Mandiant’s capabilities to its own cloud platform.
Now, the cybersecurity company Palo Alto Networks may also be on Google’s shopping list, Wedbush’s Ives said. The two companies already work closely together, and buying the firm would give Google Cloud a leg up in data and network security, but its $56 billion market cap makes such a deal unlikely.
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