Once a tech company gets to a certain size, the lines between offense and defense begin to blur. Really, though, it doesn't matter if analysts and financial writers categorize Google's (Nasdaq:GOOG) widely-rumored acquisition of Waze as offensive or defensive. The fact is, Waze is a valuable mapping asset and it brings more value (and a deeper moat) to Google's already valuable and important mapping assets.

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The Deal To Be (Or Not To Be... It's Still A Question)
Financial news sources are reported the Google-Waze transaction as basically a done deal, but as of the time of this writing there has been no official announcement from either company. Assuming that the widely-reported rumors are accurate, though, Google will be buying Waze in a transaction worth $1.1 billion to $1.3 billion.

It is unlikely that Waze will be bringing substantial revenue to the party right off the bat. The company started running ads back in late 2012, but even if the company is up to Pandora-level (NYSE:P) revenue per user, that works out to around $200 million in annual revenue based on recent active user data. If that number is in at least the right zip code, clearly Google is not doing this deal to significantly add to its near-term revenue prospects.

SEE: Analyzing An Acquisition Announcement

If Google Owns It, Somebody Else Can't
If a deal for Waze isn't about its standalone financial contributions, why do the deal? If Google didn't (or doesn't) buy them, somebody else will. Facebook (NYSE:FB) was reportedly in talks to buy Waze and while Apple (Nasdaq:AAPL) has its own mapping technologies (and the ability to passively track user routes), either Apple or Microsoft (Nasdaq:MSFT) could have theoretically been interested in the company as well.

This deal helps secure Google's edge in mapping technology. Google Maps is already a valuable asset, and adding Waze to it should only help. For those not familiar, Waze is basically a social mapping app that passive tracks user routes (via GPS) and provides real-time information and alternative routes for drivers. So while a static map is all well and good, Waze can get you to your destination faster by responding to traffic congestion and offering new routes in real time. Reportedly, 9 out of 10 Israeli drivers use Waze and that speaks to the potential stickiness of this property and its utility to Google.

Google could conceivably use this technology in multiple ways. Although I think we're a long, long way from self-driving cars, I don't think we're that far at all from having highly connected cars. A stronger mapping and real-time routing technology clearly makes Google a player in that environment. Moreover, Google's existing mapping business is arguably a $3 billion to $4 billion revenue opportunity by 2016, and that's a figure worth protecting.

SEE: A Primer On Investing In The Tech Industry

The Bottom Line
This deal highlights one of the best aspects of the Google story, but also one of the biggest dangers – Google has the financial resources to pretty much do whatever it wants whenever it sees the need or opportunity. As it is customary to talk about a company's deal history when a new deal is announced, it's probable that investors and analysts will speculate as to whether this is a deal along the lines of YouTube and DoubleClick (controversial at the time, but lucrative in the long-run) or something more like Slide or Frommer's – deals that largely produced no meaningful value for investors.

I thought Google was undervalued prior to this announcement, and I continue to see the shares as underpriced. Google may be something of a victim of its own success in that the stock is over-followed and over-analyzed (which can lead to the stock underperforming for short periods of time), but I believe the long-term cash generation potential of this company makes the shares worth owning from here.

At the time of writing, Stephen D. Simpson did not own any shares in any company mentioned in this article.

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