The Cloud

Google Adds Cloud Services With Apigee Deal

The $625 million acquisition of the developer of API management software accelerates Google's push into the enterprise cloud market.
Matthew HellerSeptember 9, 2016

Alphabet Inc.’s Google has agreed to acquire software developer Apigee for about $625 million, accelerating its push into the enterprise cloud market where it trails Amazon and Microsoft.

Apigee, which was founded in 2004 and went public in April 2015, manages the application programming interfaces, or APIs, through which digital services connect. Its customers include AT&T, Burberry Group, Vodafone Group, and the World Bank.

Diane Greene, who was hired last year to lead Google’s enterprise-cloud business, has been pushing the company to compete more effectively with Amazon and Microsoft. Google said Thursday it will pay Apigee shareholders $17.40 for each share, a 6.5% premium to the stock’s Wednesday close.

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“APIs … are vital for how business gets done today in the fast-growing digital and mobile marketplace,” Greene said in a blog post. “The addition of Apigee’s API solutions to Google cloud will accelerate our customers’ move to supporting their businesses with high quality digital interactions.”

Forrester has estimated that U.S. companies will spend $660 million a year on API management by 2020. “With the cloud computing industry heating up, Google is looking for differentiators and value-added services to offer its cloud-computing customers,” VentureBeat said.

“Now, with Apigee’s API smarts integrated into its enterprise offering, Google has added a valuable string to its bow,” it added.

Among other things, Apigee manages the APIs that allow the users of mobile apps to print photos and quickly order refills of prescriptions at any Walgreens store. The company earns a fraction of a cent every time a consumer taps an API.

“It is stunning how almost every customer is bringing up [APIs] when I’m in meetings,” Greene told The Wall Street Journal, adding that companies report big sales increases after activating APIs.

Apigee posted revenue of $66.9 million for the nine months ended April 30, an increase of 34% from the year-earlier period. “Google has fallen behind both Microsoft Azure and Amazon Web Services in enterprise cloud computing, and this move is intended to strengthen that position,” analyst Patrick Moorhead of Moor Insights & Strategy told Reuters.

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