Deal of the week

M&A RESTRUCTURING OF
THE WEEK
Saturday 12th of March 2022

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 Deal of the week

RESTRUCTURING OF THE WEEK

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Overview of the Google Cloud restructuring proceedings

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On March 8th, 2022, Alphabet announced the restructuring of Google’s Cloud business. Indeed, the recent acquisition of
Mandiant for $5.4 billion called for a round of layoffs and restructuring to boost Google’s cloud-based security offer. The job cuts and
restructuring should affect diverse Cloud products, such as Looker, the data-analytics company which was acquired by Google in early 2020
for $2.4 billion. Google should reshuffle its cloud business into four different teams : Google Cloud, Looker, Workspace (former G Suite), and
M&A.
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 Deal of the week

GOOGLE
IDENTITY CARD
Founding Number of 156,500
1998
Date Employees
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(2021)

rou Ø Revenue: $257.4 Bn

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Ø Headquarters: Mountain View (2021)
Locations Financials

ing Ø Present in 194 countries Ø Net income: $76.1 Bn

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(2021)

two $13.93 Bn

e
Total Debt

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(2020)

ial
anc
Fin Headquarters & stock

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location
Mountain View, CA, USA

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 Deal of the week

STRATEGIC Google is trying to strengthen its cloud computing security business with the restructuring of the its
RATIONALE Cloud services and the acquisition of cybersecurity firm Mandiant.

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Google informed dozens of employees last week that their activities

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Alphabet share price evolution YTD : now trading at $2,629 (-9.31%)

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within the company’s Cloud support teams would be terminated. The

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company will be consolidating other teams in selected regions and Alphabet

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transferring some responsibilities directly to vendors. Share Price YTD
•

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Although Google grew its cloud revenue by 45% in Q4 2021 compared

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(USD)
https://www.marketwatch.com/inve

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to Q4 2020 (to reach $5.5 billion), the business remains unprofitable sting/stock/googl?mod=over_search

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and is outperformed by Amazon Web Services and Microsoft Azure.

the last four years.

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Google Cloud lost more than $3 billion in 2021 and $17.6 billion over
To build a sustainable operating model that enables us to delight and

al N improve Googler well-being over time, we are accelerating our

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• Cutting jobs will therefore help the unit to save money. The strategy to move some work to our Support hubs and vendors and are

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restructuring should affect engineers in California, Austin, Sydney, and restructuring our operations to create further efficiencies. We realize

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that reorganizations can be difficult, and we did not make these

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Zurich. Google Cloud is reportedly focusing on hiring for customer

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decisions lightly.

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support positions in Mexico City.

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https://www.businessinsider.com/google-cloud-layoffs-support-teams-looker-2022-3 (email to staff)

• The objective of this restructuring is to « build a sustainable operating

model », and Google Cloud CEO Thomas Kurian is expecting to reach Atul NANDA
profitability later this year. Google Cloud’s revenues come primarily Vice President
from fees received for GC services and Workplace collaboration tools, Google Cloud Support
which went up 80% in total deal volume in 2021.

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 Deal of the week

PUBLIC CLOUD Google Cloud operates in a constantly growing market. Cloud services can include DaaS, System
& cloud application infrastructure services, or cloud management & security services where the
MARKET DATA expected growth rate is higher than 17% in 2022.

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Public Cloud Market Data (USD Billion)

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Public Cloud Services Market Size Global Top 10 Cloud Vendor by Total

ing Revenue in Fiscal Quarter in mid-2021

ork 482
MICROSOFT

AMAZON 14,8
19,5

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396 IBM 7

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314

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SALESFORCE 5,96

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243 GOOGLE CLOUD 4,63

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197

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145

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SAP 2,69

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ORACLE 2

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2017 2018 2019 2020 2021 2022

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0 5 10 15 20 25

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In a growing market, Google Cloud experiences difficulties to compete with the main actors in the market (such
as Amazon and Microsoft) as its revenue for Q2 2021 represented only ¼ of Microsoft’s.

Source: https://www.statista.com/ Financial Networking Group. All rights reserved.

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 Deal of the week

GOOGLE CLOUD’S
PRE-RESTRUCTURING SITUATION

p
P&L (USD Million)

Alphabet Revenues
rou Google Cloud's Operating Income
300000

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2018 2019 2020

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250000

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6%

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200000

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3.66%

t
150000 4%

e
100000

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2%

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50000 -4348

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-4645

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0 0%

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2017 2018 2019 2020 2021 -5607
Overall

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Google Cloud %Google Cloud

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Expected 2021 Google Cloud Revenues are $19
billion, which represents 7.45% of Alphabet’s
overall revenues in 2021. This share has increased
However, Google Cloud is still not profitable. The loss
increased by $962 million from 2019 to 2020. That can be
explained by a $5 billion increase in total expenses in the
continuously since 2017. same period (increase in headcount).

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Source: https://abc.xyz/investor/ External sources: S&P Global Market Intelligence, Thomson Reuters, Bloomberg and Investing.com
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 Deal of the week

DETAILS ON THE RESTRUCTURING PLAN

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In addition to the restructuring plan, Google announced on March 8th that it had entered into a definitive agreement to

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acquire Mandiant Inc. in an all-cash transaction valued at about $5.4 billion. Mandiant is well-known for its XDR platform that
proposes several services: defense automatization, cyber threat intelligence, monitoring control, etc.

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The leading company in dynamic cyber defense and its platform will be fully incorporated into Google Cloud and will

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allow to deliver a more valuable security offer in Zero Trust (BeyondCorp), in malicious contents (VirusTotal) or in analysis &

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automatization (Chrononicle). Additionally, Google Cloud will benefit from highly-qualified engineers and from Mandiant’s

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intellectual property.

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Nonetheless, Google Cloud already acquired Siemplify in January 2022. Acquiring Mandiant implies another reshuffling

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of Google Cloud’s structure, which is considered unstable comparatively to its competitors on the market. Furthermore, it will be
interesting to follow how Google will consolidate Mandiant as its activities are also unprofitable (operating loss of about $3.5

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million in 2021, +18% YOY) and its leverage ratio reached 27.3x in 2021.

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Sources:
https://abc.xyz/investor/news/releases/2022/0308/
https://www.marketscreener.com/quote/stock/MANDIANT-INC-14325709/financials/
https://investors.mandiant.com/news/news-details/2022/Mandiant-Reports-Financial-Results-for-Fourth-Quarter-and-Full-Year-2021/default.aspx
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 Deal of the week

DISCLAIMER
This report has been prepared by Financial
Networking Group for information purposes
only. No information published in this report

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constitutes a solicitation or offer, or
recommendation, to buy or sell securities of

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any other financial instruments. Although we

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have used sources believed or accurate, we

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do not guarantee either the accuracy or

or
completeness of this report. No reliance

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should be placed on the information in this

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document to transact in financial products

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and no liability is accepted for any loss arising

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from reliance on it.

ancAny opinions expressed are subject to change

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without notice. Investors are expected to

Fi make their own investment decisions without

relying on this information. You should obtain
specific advice from qualified experts before
making any investment decision.