As Russian tanks sweep across Ukraine, the world’s political and business leaders are hardening their defenses for another kind of warfare: cyberattacks.
On Tuesday, Alphabet (GOOGL) announced it would acquire Mandiant (MNDT), a maker of cybersecurity software.
The $5.4 billion buyout will harden Google Cloud as the subsidiary expands its offerings.
- It’s a big deal because Google Cloud is at a make-or-break point.
And there’s a ton of potential because its parent company, Alphabet, has a strong history of winning the markets it enters.
From Search to Android, YouTube, Chrome and Gmail, the company — based in Mountainview, California — is known for its scale and prowess in machine learning.
However, its cloud computing business is currently a minnow in a sea of whales … but the amount of potential is as vast as the seven seas.
Amazon.com (AMZN)’s Amazon Web Services (AWS), and Azure, a subsidiary of Microsoft (MSFT), are both much larger than Google Cloud.
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They have larger ecosystems with legions of third-party software developers building atop their platforms. They also have most of the marquee government and corporate accounts.
It’s safe to say that Google Cloud is marching forward at a strong pace, and the master plan is currently being captained by Thomas Kurian, who was hired in 2018 to lead the cloud business operations.
As an ex-Oracle (ORCL) executive, Kurian brought a strong sales background that is unquestionably helping his early success.
Source: Business Insider
In the fourth quarter, Kurian helped grow Google Cloud revenues to $5.4 billion, up 45% year over year, according to documents filed with the Securities and Exchange Commission (SEC).
Expect More Sustained Growth
Based on recent actions, I expect that number to keep growing.
Now Google Cloud is adding Mandiant (MNDT), a large cybersecurity firm, to fortify cybersecurity.
It will help the firm beef up what it offers to public and private sector firms that are asking for an artificially intelligent security layer to automate data.
Mandiant was founded in 2004 as Red Cliff Consulting by Kevin Mandia, a United States Air Force officer.
After receiving funding from Kleiner Perkins Caufield & Byers in 2011, the business quickly scaled up.
Revenues in 2012 grew to $100 million, and the company — based in Reston, Virginia — was under contract with many Fortune 100 firms and various government agencies.
The company rose to fame in 2013 when its analysts directly implicated China in cyber espionage.
Mandiant analysts also discovered that hackers were using sophisticated malware in 2020 to digitally sign certificates on the SolarWinds platform.
The supply chain hack was the largest attack of its kind ever levied against U.S. government infrastructure.
And the firm was contracted in 2021 by the Federal Bureau of Investigations (FBI) to assist in the Colonial Pipeline ransomware attack.
The FBI later confirmed that DarkSide, a Russian hacking group, was responsible.
- There’s no denying it: Cybersecurity has moved to the forefront of corporate and public sector life.
Chief information officers are more aware than ever that attacks are likely to increase as the West ramps up financial sanctions against Russia to end its invasion of Ukraine.
Russia is considered to be one of the leading state sponsors of malicious cyberthreats, according to a Digital Defense report from analysts at Microsoft.
- And a Gartner (IT) survey of CIOs in 2021 found that 88% planned to invest more to stave off cyberthreats.
Mandiant is the perfect vehicle for Google Cloud to make an end run at a total addressable market that could exceed $270 billion by 2026.
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There is another reason to like Alphabet shares, though ...
The firm continues to grow quickly, it’s expertly managed, executives are buying back shares hand over first to return capital to shareholders and the firm will conduct a 20-for-1 stock split in June.
And I’ve been a believer of this thinking for quite a while. Back in 2016, I recommended GOOGL shares to my Weiss Technology Portfolio subscribers, and they’re currently sitting on a 273% open gain. If tech stocks interest you, I highly encourage you to click here to learn more.
Alphabet reported in February that fourth-quarter sales surged to $75.3 billion, an increase of 32% year over year. Profits grew to $21.9 billion, up 29% over the same time frame.
CFO Ruth Porat, who also happens to be a veteran of Morgan Stanley (MS), announced in April 2021 that the firm would buy back $50 billion worth of stock.
At a price of $2,542, shares trade at only 18.7 times forward earnings and 6.6 times sales.
These metrics seem low for a firm of this size with 57% gross margins.
Investors should strongly consider buying Alphabet shares into the weakness. Always remember to do your own due diligence before buying anything.
Best wishes,
Jon D. Markman
