Google, which is owned by Alphabet Inc. (GOOGL), has fallen behind in cloud computing and may need to perform a major acquisition to catch up, according to Barron's. The search engine giant, which is used to being a dominant player, might purchase a cloud computing vendor as big as Workday Inc. (WDAY) or Salesforce.com Inc. (CRM), according to rumors circulating on Wall Street. (For more, see also: Google: No to Price War Over Cloud Computing.)
At the time of report, Workday and Salesforce.com had market capitalizations of $22 billion and $70 billion, respectively, Google Finance data shows. While purchasing the former company would increase Google's annual cloud revenue by $2.1 billion, buying the latter would increase this revenue by $12 billion, according to Barron's. Currently, Google's annual cloud revenue stands at $2 billion, according to estimates provided by Jefferies Group LLC (JEF) analyst Brent Thill.
In addition to pursuing major acquisitions, Google has other options available. Diane Greene, who has been tasked with helping to bolster its cloud revenue, stated during a conference in September that the company is taking steps to fuel organic growth in this particular space, including exploring partnerships and hiring sales representatives.
Will Google Make a Big Move?
"An obvious question people are trying to figure out is whether Google will make a bigger move to try and jump-start their business," says Mark May of Citigroup Inc. (C), who interviewed Greene during the event. The search engine giant will leave no stone unturned, he asserted. "She was very clear that they will look out for acquisitions, and of any size, not just small, tuck-in deals, but potentially medium and large deals."