In December, data analytics startup Looker Data Sciences raised $103 million in new venture funding at a valuation of $1.6 billion. Thursday morning, the Google division of Alphabet Inc. said it would pay $2.6 billion in cash to acquire Looker. That’s a pretty sweet deal for Looker’s investors.
All that stands between the investors and a nice payday is regulatory approval. More about that later.
Looker’s December funding round was led by Premji Invest, an India-based firm. Crunchbase identifies Looker’s other investors as Redpoint, Meritech Capital Partners, Kleiner Perkins, Goldman Sachs, Cross Creek and Capital G. All told, Looker had received $280.5 million in venture funding.
In its press release announcing the acquisition, Google said that adding Looker to Google Cloud “will provide customers with a more comprehensive analytics solution — from ingesting and integrating data to gain insights, to embedded analytics and visualizations — enabling enterprises to leverage the power of analytics, machine learning, and AI.”
The high premium that Google paid for Looker reflects both the quality of Looker’s product offering and Google’s need to juice up its cloud business. In a recent report from IHS Markit on total cloud services revenues, Google does not make the top three vendors.
IHS Markit expects the global off-premises cloud service market to grow at a five-year compound annual growth rate (CAGR) of 16%, reaching $410 billion in 2023. Within that overall sector, the research firm expects cloud as a service (CaaS) and platform as a service (PaaS) to be tied for the largest 2018 to 2023 CAGR with 22% of total revenue growth. Infrastructure as a service (IaaS) and software as a service (SaaS) will have the second and third largest CAGRs of 14% and 13%, respectively.
The current overall cloud services leader is Microsoft Corp. (NASDAQ: MSFT), with a 13.8% share of the market. Amazon.com Inc. (NASDAQ: AMZN), the previous leader, was knocked down to the number two spot with 13.2%, and International Business Machines Corp. (NYSE: IBM) was number three with 8.8% revenue share.
Looker’s CEO, Frank Bien, told TechCrunch last December that the company had 1,600 customers and a $100 million run rate and that revenue was growing at a rate of around 70% a year. The acquisition by Google, Bien said Thursday, “advances our mission that we undertook from the beginning — to empower humans through the smarter use of data.” The two companies already sell their services to a common 350 companies.
Now, about that regulatory approval. Google is probably on pretty safe ground here. It’s not one of the dominant players in the cloud services market and the addition of Looker would appear to boost its appeal to potential converts from Microsoft, Amazon or IBM. A lot may depend on Google’s being able to show that it has no dog in the hunt, so to speak, and that its cloud services business doesn’t feed the company’s gaping maw for more consumer data to sell to advertisers.
Alphabet’s shares traded down more than 0.5% in the noon hour Thursday at $1,039.18, in a 52-week range of $977.66 to $1,296.97. The stock’s 12-month consensus price target is $1,341.82.
Date: June 10, 2019
Source: 24/7 Wall