(Preview) Why Google Wants Wiz for $32 Billion, Xbox One and Bygone Streaming Hardware Dreams, Immortality and Daylight Saving Time

A look at the logic of Google's plans to purchase an Israeli cybersecurity firm for $32 billion, more tension between Apple, Google and the EU, and an email about Xbox One and Microsoft's checkered history of consumer tech ambitions. At the end: Moana 2 and what led to the decision to abandon windowing, Bryan Johnson's pursuit of immortality, and a few follow-ups on Daylight Saving Time.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Andrew Sharp?

  Hello and welcome to a free preview of Sharp Tech.

• 0:08Andrew Sharp?

  We didn't get emails about the first two stories that we're going to hit tonight. I did want to get your take on some recent news, though. So we'll go one by one here. Headline number one is from The Verge. "Google Acquires Cybersecurity Firm Wiz For $32 Billion." And just some context from the story. This is the company's second attempt to buy Wiz after talks stalled last year at a lower $23 billion valuation. Wiz is a fast-growing Israeli-founded startup that works with companies like Microsoft and Amazon to provide cloud-based cybersecurity solutions. The company was valued at $12 billion in May 2024,

• 0:50Andrew Sharp?

  which reportedly climbed to $16 billion later in the year in an equity offering to employees. My question, Ben, I was actually wondering about this over the summer. We never got to it because the initial purchase attempt fell apart. Can you explain to people why Google has been trying to buy Wiz for the past year now? And is now paying twice what the valuation was earlier this year?

• 1:14Ben Thompson?

  Well, before I get to that question, can I ask you a question first?

• 1:18Andrew Sharp?

  Please.

• 1:19Ben Thompson?

  Do you really care about this story?

• 1:22Andrew Sharp?

  So I was curious about it because I wonder how cybersecurity factors into what Google is doing. I mean, this is like by far the biggest acquisition.

• 1:32Ben Thompson?

  They're just saying it's a pretty deep cut for the, oh, I don't know anything about tech. I'm going to come out here and nobody emailed. I was so disappointed. I want to know about Google acquiring a cybersecurity startup. I don't know. I'm just inquiring. I just want to understand the parameters of what we're doing here.

• 1:46Andrew Sharp?

  It's, I mean, this is like the F1 thing all over again. It's a real wake-up call for my revealed preferences. I mean, this emerged over the summer and I was like, I bet Ben could probably explain what Google's thinking with that deal. But on its face, I don't really know why Google cares this much about cybersecurity. Maybe we should all care more about cybersecurity, but take it whatever direction you want. I'm just curious.

• 2:10Ben Thompson?

  Well, that bit actually, maybe everybody should care more about cybersecurity is actually probably a good take. Like this is a, a growing area. It has been growing for a long time. It's probably going to continue growing for a long time. It turns out that, uh, security is important. It's funny. I remember early in Stratechery, always writing about the extent to which companies did not take security seriously. And, you know, there were the, all these big hacks. I remember there's a huge one with Target. I remember I, I spent some time writing about, and it's one of those things that it was always hard to, you know, especially when stuff's quote unquote new. Uh, you don't really realize the cost of not having security until something bad happens.

• 2:53Ben Thompson?

  And at some point, it does feel like we cross the, cross the line where it's just a hot sector. Everyone knows you have to spend on it. And there's been a flurry of new companies and startups and stories and stuff about this. And it is an area that Israel does seem to dominate in general. You mentioned that, that Wiz is an Israeli startup. And Wiz is, you know, one of the things that happens is as technology progresses, you get new solutions that are sort of predicated on what's available today. And Wiz just makes it really easy to get started, particularly for a use case, if you're a large company and you have a multi-cloud deployment,

• 3:34Ben Thompson?

  which is to say, basically you have some stuff on Azure, you have some stuff on AWS, you have some stuff on Google, you have some stuff internally. There's a lot of companies that are, that are in this state.

• 3:46Andrew Sharp?

  So like percentage wise, are we talking more than 50% of the Fortune 500 approaches cloud solutions that way?

• 3:54Ben Thompson?

  That's a great way to put me on the spot with a number that I don't know the answer to. But the key part is, is it is primarily, I think, attractive to Fortune 500 sized companies, which are more likely to have this, this heterogeneous cloud environment. And all the cloud providers will have their security solutions. But then you're stuck, well, but I have stuff that actually, you know, my, my workloads go across different clouds. And, and this gives sort of a top-down view of everything that's going on. It plugs into all them, uh, with this sort of like read-only. Point where you're not running these agents, running locally in all the different clouds and using up resources and having to manage them. It just, it, it, it, it provides a different take, a different

• 4:39Ben Thompson?

  approach that starts with the assumption, everyone has these multi-cloud environments. How do you do that? As opposed to like, say, an AWS solution that starts with AWS and maybe we'll have some endpoints for other clouds, but that's not really their focus. And I think that gets to why this is interesting to Google. They are the third place cloud provider by a pretty significant amount to AWS and Azure. A lot of their focus by necessity is on, okay, we get you have workloads on AWS or on Azure, but you also want to run those workloads on Google and we have the best AI or we have like whatever the offerings that that we have or used to do

• 5:18Ben Thompson?

  future workloads there. In that context, having an offering that number one has crazy growth. So it's a way into companies, but number two is predicated on this multi-cloud environment. Google by virtue of being last and the latest starting is leaning into, okay, we get it. You're going to be multi-cloud. Let's make that easier for you. Let's make that sort of more approachable for you. So from a strategic perspective, it makes a ton of sense and has continued to make sense. I think the, the question is, you know, why is Google spending so much? Why don't they just build it themselves? And this is just a reality of big companies. Uh, I mean, there's

• 5:58Andrew Sharp?

  gonna say, we went over this a week ago, you know?

• 6:00Ben Thompson?

  I mean, there's, you could frame a lot of M and A stuff or just general company discussion with a never-ending struggle between shareholders who are like, look, you have an amazing business. Can you just give us the money that you're making from it as shareholders? We are technically the owners of this business to the managers of these companies that

• 6:26Ben Thompson?

  You know, we, we, we are capable, we can do everything. And, uh, and like a happy middle ground is, okay, you're a big company that can't do anything. So spend that money on expanding your business in a way that, you know, you get not just synergies, but also strategic possibilities like, okay, I own Google. We get it, Google, you're not going to actually pay, you know, have a massive dividend or, or, or your share buybacks, which exist are not as large as I wish they would be. But instead of you trying to pretend you're still innovative and capable of doing something. Okay, fine. Go buy this startup and plug it into your business and generate more increased enterprise value that way. That, that's sort of the, the, where all these companies end up.

• 7:08Andrew Sharp?

  Google did this, I mean theoretically $32 billion could buy them all sorts of resources. But then they have to

• 7:16Ben Thompson?

  They have to actually execute on that.

• 7:17Andrew Sharp?

  With whiz.

• 7:18Ben Thompson?

  That's right.

• 7:19Andrew Sharp?

  Yeah, exactly. And make it work. So if I were a shareholder, I understand this approach. Um, and the lead that Microsoft and Amazon have in cloud services is pretty substantial. I mean, Microsoft $105.4 billion in revenue from cloud services. Amazon 107.6 billion and Google is sitting at just 43 billion in 2024 cloud services revenue. So is the theory that offering a more integrated solution will help them eventually eat into that market, eat into the Microsoft and Amazon revenue?

• 7:55Ben Thompson?

  Yeah. Well, I mean, all those cloud numbers are also kind, they all account for them differently and what goes into them and whatnot. I think Microsoft is actually the most sort of, uh, uh, squirrely about this in some respects, but yeah, but by and large, AWS and Microsoft are large. Google's smart for, I think from Google's perspective, it's a way to sell into companies they're not in because it whiz is a great solution. And that is a beachhead then to say, okay, now we are, look, we get you want to be multi-cloud. So yes, we're not telling you to move your stuff from AWS or from Microsoft, but hey, we have this, you know, we have great services that you might want to access. And oh, that's a security problem. Well, we have this solution that sort of solves that. And then, so I think it's both a beach It's both a potential value add for their business.

• 8:39Ben Thompson?

  And from Wiz's perspective, it's obviously a great exit. And they also a big change, I think, in the, in the new version of the deal is there's like an astronomical breakup fee, like $3 billion or something like that, which if there's antitrust issues, then they basically just raised a new round, which again could be a little iffy culturally. Like you, everyone now is like, yay, we got our exit and it has to actually, actually go through. But I think the broader takeaway is this, I'm generally pro big acquisitions by big companies. Making new products and developing them is really hard. You do that when you're small in a startup because you have no choice. And that no choice, I think, is an important ingredient to actually doing good work.

• 9:23Ben Thompson?

  When you're large and you have resources, yes, Google could in theory build the same thing, but it's probably not, to your point, it's not going to be as good. It's going to take a long time and they're competing with Wiz along the way. And so in lieu of actually running their monopolies into the ground and just throwing off tons of money.

• 9:43Andrew Sharp?

  Lighting money on fire.

• 9:44Ben Thompson?

  No, no, no, not lighting money on fire. I think from a shareholder perspective, the best thing for these companies to do is just do what you're good at and throw off all the money shareholders, let me go and invest my money in a Wiz or whoever else it might be. But it's just like this manager agent problem, or that's not the term for it, but like where you have managers in charge of these companies that their motivation and their belief, and the press, I think, feeds into this, this belief that why aren't these companies innovating? They like this assumption they should live forever. My sort of theoretical view on this is no, they should not. They're like, they should do what they're good at and let someone else do the other new stuff. That just doesn't happen.

• 10:25Ben Thompson?

  So in lieu of that, I would rather operate like a glorified, like, you know, PE firm and spend your profits on. Companies have figured it out and plug it in and move forward in that regard. That's separate from the whole regulatory angle. I'm just saying from a, from an analyst perspective, I don't hate acquisitions by and large. I think this one makes, makes strategic sense for Google. I think the cloud platform for Google is a good thing for them to invest in. They get the payoff from their infrastructure. They get the payoff from their AI work without it having the disruptive internal incentive problems that they have with search on the consumer side.

• 11:09Ben Thompson?

  And so I think leaning into this space makes sense. Is it a ridiculously large number? Yes, um, is that probably the best you can hope for from a shareholder perspective? I think also yes.

• 11:20Andrew Sharp?

  Yeah, well, and Google makes ridiculously large numbers in revenue every quarter. So I imagine they'll be fine funding this deal.

• 11:30Ben Thompson?

  I mean, this is, this is just kind of what you sign up for, right? Like it, it's, there's always this angst about these companies. Why don't they, you know, they have all this money like, it's like, like Facebook is a classic example. Like they're buying Oculus, they're spending all this money on virtual reality labs. This is actually the best use of, of money? Well, no, but, uh, in this case, Mark Zuckerberg is very much in charge and he gets to decide. And that's just part of what you're signing up with. I mean,

• 11:57Andrew Sharp?

  And it's still a fraction of what they're earning. All of these companies, it's like cartoonish when you look at the numbers in play, uh, in terms of profit. So I'm not sweating it in that respect on Google's side.

• 12:09Ben Thompson?

  Yeah.

• 12:11Andrew Sharp?

  Yeah, exactly.

• 12:13Andrew Sharp?

  Speaking of money though, I was reading the cloud services revenue and I realized as I was asking you that question. I was like, all right, Ben's got me here. I don't actually care what the answer is in terms of Google's cloud services strategy. One other question though, before we move to headline number two. Do you have any idea how cybersecurity became a specialty industry of its own in Israel? And the answer can be, I don't have an answer on this podcast, but perhaps we can revisit it later on.

• 12:43Ben Thompson?

  I think there are some sort of like military tie-ins, like, like there's a lot of training that happens and you get people coming out that are like plugged into some of these issues. I can imagine there's cultural reasons, like I know people.

• 12:58Andrew Sharp?

  All right, and that is the end of the free preview. If you'd like to hear more from Ben and I, there are links to subscribe in the show notes, or you can also go to sharptech.fm. Either option will get you access to a personalized feed that has all the shows we do every week, plus lots more great content from Stratechery and the Stratechery Plus bundle. Check it out, and if you've got feedback, please email us at [email protected].