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Can antitrust regulators really stop the Google-Mandiant deal?

March 8, 2022, 5:50 PM UTC

Google’s regulatory enemies will soon have a curious case on their hands.

In a move designed to bolster its cloud computing unit, which trails well behind that of Amazon and Microsoft, the search giant announced Tuesday its intent to acquire cybersecurity firm Mandiant for $5.4 billion. The deal ranks as Google’s second-biggest purchase ever, behind the $12.5 billion acquisition of Motorola Mobility in 2011.

If the addition goes through, Google could offer the services behind one of the cybersecurity industry’s leading outfits, best known for helping businesses prevent and investigate network hacks. In its most newsworthy contribution to the sector, Mandiant uncovered the SolarWinds breach in 2020 after hackers accessed dozens of corporate and government networks through a buggy software update.

With the ink barely dry on Tuesday’s press release, questions have arisen over the potential for antitrust officials to block the deal. The Google-Mandiant pact, however, is hardly a slam-dunk decision for them.

Google certainly ranks among regulators’ least-favored companies, largely owing to its market-dominating search and ad practices. The company has racked up billions of dollars in pending and court-affirmed fines in Europe, while the U.S. Justice Department and many state attorneys general have filed lawsuits over the past few years alleging anticompetitive practices.

But while Google’s search and ad businesses destroy the field, helping parent Alphabet report a company-record $76 billion in profit last year, its cloud division remains third fiddle. 

Amazon owns about 33% of the global cloud infrastructure market share, besting Microsoft’s 20% share and Google’s 10% share, according to data published last October by Synergy Research Group.

And while Google’s cloud unit continues to grow at a breakneck clip—its revenues jumped from $4 billion in 2017 to $19 billion in 2021—the division has never turned a profit. Alphabet reported Google Cloud losses of $3.1 billion last year and $5.6 billion in 2020.

As The Information detailed Monday in a timely exploration of Google’s cloud business, the company jumped into the cloud game later than Amazon and lacked the long-standing customer relationships of Microsoft. Google’s product offerings also pale in comparison with those of its top two competitors, The Information noted.

As such, Google’s current situation puts antitrust regulators in a pickle with regard to Mandiant. 

The company hardly dominates the cloud sector. In fact, it’s pushing more-established rivals Amazon and Microsoft to compete in a fast-evolving marketplace.

But allowing the Mandiant acquisition will further solidify the cloud sector’s three dominant players. The cloud business remains notoriously difficult to break into, with massive startup costs. Customers also are loath to take risks with their networks and data on smaller, less-experienced outfits.

In yet another timely analysis of cloud competition, the Wall Street Journal asked three computing-industry experts about the future of regulation in the sector. Each warned that the cloud oligopoly carries risks for customers if the sector becomes lethargic, but none called for a government crackdown.

“For me, concentration of market share is neither good nor evil, in and of itself,” Sanjukta Das Smith, chair of the management science and systems department at the University at Buffalo School of Management, told the Journal. 

“Regulations cannot build a healthy corporate culture. But regulations can perhaps work to discourage temptations to extract higher revenues [from consumers] without adding value, creating instruments that make the lock-in problems worse, etc.”

With three companies still feverishly battling for cloud dominance, it’s hard to see how third-place Google’s acquisition of Mandiant could hurt customers for now. This decision, however, could test regulators’ tolerance for one of their chief anti-competition targets.

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Jacob Carpenter

NEWSWORTHY

Russia goes on offense. Google cybersecurity officials reported Monday that they are seeing Russian hackers launch more phishing campaigns and online attacks against Ukrainians and their allies in recent weeks, Reuters reported. Google experts said some of the attempted hacks trace back to well-known groups with ties to the Russian government, including the FancyBear collective and a Belarusian hacker known as Ghostwriter/UNC1151. Google did not specify how many attempted hacks were successful.   

America goes on defense. Three leading U.S. cybersecurity firms announced the formation Monday of a partnership to help hospitals and utility companies stave off potential attacks launched by Russia in retaliation for U.S. support of Ukraine, VentureBeat reported. Cloudflare, CrowdStrike, and Ping Identity said they would provide free products and services for at least four months to select “critical infrastructure” organizations in the U.S. The offer arrives one month after the U.S. Department of Homeland Security issued a nationwide warning that Russia could step up cyberattacks against American entities amid President Vladimir Putin’s invasion of Ukraine.

DJ, turn it up. Amazon is expected to jump into the live-audio space Tuesday with the beta launch of a new app called Amp, which allows users to host a radio-style show, Protocol reported. The product mirrors offerings from Spotify, Twitter, and Clubhouse, all of which have developed live-audio platforms in the past couple of years. Amp users will have access to millions of free songs, allowing them to alternate between recorded music and live audio.

He wants his Twitter back. Tesla CEO Elon Musk asked a federal judge Tuesday to terminate a 2018 settlement he reached with the Securities and Exchange Commission in which a securities lawyer preapproves his tweets, the Wall Street Journal reported. In a new legal filing, Musk argued the Twitter arrangement is too cumbersome and the SEC is overstepping its grounds by requesting excessive documentation from him. The settlement came in response to Musk tweeting that he had secured enough funding to take Tesla private, which the SEC claimed had amounted to investor fraud.

FOOD FOR THOUGHT

A question of religion. The cryptocurrency boom has wrought all sorts of debates, including this one with religious roots: Does crypto violate the tenets of Islam? It’s the latest in a long series of financial discussions among Muslim leaders and worshippers, who are split on whether buying and selling crypto is more akin to gambling or investing, the Washington Post reported Tuesday. The Koran forbids gambling and profiting off interest loans, among other financial practices, putting crypto in a fuzzy middle ground given its volatility.

From the article:

Other financial innovations like currencies that aren’t backed up with gold reserves, credit cards, and commodity options trading have all sparked debates in the past.

The stakes are high. As prices for bitcoin and other cryptocurrencies rose rapidly last year, millions of people in the Islamic world began investing in them, especially in Indonesia and the Persian Gulf states, which have large populations of digitally-connected young people.

IN CASE YOU MISSED IT

Soaring nickel prices will make it more expensive to buy your next Tesla. Just ask Rivian customers, by Christiaan Hetzner

Steve Wozniak calls Bitcoin ‘pure-gold mathematics’ and the reason shows why crypto could be here to stay, by Jonathan Vanian

More than half of Kenya’s entire GDP is now transacted on this African fintech app, by Bernhard Warner

Scammers are pretending to raise money for Ukraine. Here’s how to make sure your donation goes to the right place, by Amiah Taylor

Anonymous claims it hacked into Russian TVs and showed the true devastation of Putin’s Ukraine invasion, by Carmela Chirinos

Google transforms Poland office into help center for Ukrainian refugees, by Amiah Taylor

BEFORE YOU GO

Work hard, play hard. Silicon Valley can get wild in the boardroom and the bedroom. A new book from former CNN reporter Laurie Segall, excerpted here in Fortune, details the steamy side of the tech industry, where driven tech employees routinely blow off steam via polyamorous relationships, swingers parties, and other NSFW activities. And as Segall writes, the Bay Area’s creative engineering minds don’t leave their ideas at the office, if you know what I mean. A high-tech sex dungeon, anyone?

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