Google Inc (NASDAQ:GOOG) looks set to acquire the Israeli navigation app Waze after several months of speculation that also involved Facebook Inc (NASDAQ:FB) and Apple Inc. (NASDAQ:AAPL).
Big-Ticket Item
The transaction is rumored to cost around $1.3 billion and will allow Google Inc (NASDAQ:GOOG) to provide improved navigation, as well as traffic reports. Recently, Waze was believed to be in sales talks with Facebook Inc (NASDAQ:FB), according to The Jerusalem Post. Facebook officials even landed in Israel to discuss a takeover bid, but a deal wasn’t reached due to the amount Facebook was offering. The same report stated that Waze was in talks with Apple Inc. (NASDAQ:AAPL) in January over a takeover bid, and Forbes confirmed the report.
Google on a Buying Frenzy
The app already has 50 million users that could boost Google Inc (NASDAQ:GOOG)’s bottom line, and further diversify the company, which seems to be falling into more niches every month. In fact, Google Inc (NASDAQ:GOOG) has made two acquisitions in Israel alone. The company purchased Labpixies, which is a personalized website gadget developer — that deal was for $25 million in 2010. In the same year, Google Inc (NASDAQ:GOOG) purchased Quiksee for $10 million.
The Battle for Tech Supremacy
Purchasing Waze for $1.3 billion shows Google Inc (NASDAQ:GOOG) is serious about being the tech leader, and is set to compete with Apple. In fact, as stated in The Jerusalem Post, Google has essentially swiped Waze right from under the nose of Apple. That could be why the company offered so much cash. And with Apple stating its map app needs work, the company likely needed this purchase to make a major step forward. In fact, Apple CEO Tim Cook said about the company’s map app in May during an interview with “AllThingsD” that “We screwed up. It’s greatly improved, but not there yet. We have more to do.”
Google’s acquisition of one of the top navigation apps on the market could set the company — which was once just an Internet search engine — apart from others in the tech field. The company obviously has the money to spend, and potentially outbidding Apple and Facebook shows that Google is serious about growth. Having the cash to do so is important in an industry where money talks. And this latest acquisition could really increase the number of Google users. The app provides information about police presence, traffic congestion, road accidents, road hazards and speed cameras. This seems like an app that no driver would want to be without. So with Apple lagging behind in a major acquisition, it looks like there could be room to take market share away from one of Google’s biggest competitors.
Facebook Put Limits on its Potential Transaction
The $1.3-billion bid is reported to be $300 million more than what Facebook offered. The Google bid landed Waze a tidy sum, but it was also Facebook’s rejection to keep Israeli workers in the company living in Israel that muzzled the deal. That lack of flexibility caused Waze to “unfriend” the social networking site, and that attitude could leave Facebook in the dust on future deals. Israeli newspaper Ha’arz stated Google’s acquisition is largely motivated by the company’s desire to block Facebook from growing. Google already operates a navigation service that was a Waze competitor, and the firm has invested a significant amount of money in the Google Street View images. For that reason, Google certainly didn’t want competition coming from Facebook.
This acquisition tells me two things: Google is serious about maintaining market share, which bodes well for investors; and Facebook will have a difficult time diversifying itself, which limits the company’s growth. Furthermore, Apple has its work cut out for it to maintain dominance in nearly every tech field imaginable. Google is in town, and the company means business.
As one of the most dominant Internet companies ever, Google has made a habit of driving strong returns for its shareholders. However, like many other web companies, it’s also struggling to adapt to an increasingly mobile world. Despite gaining an enviable lead with its Android operating system, the market isn’t sold. That’s why it’s more important than ever to understand each piece of Google’s sprawling empire.
The article Google to Buy Navigation App for $1.3 Billion originally appeared on Fool.com.
Phillip Woolgar has no position in any stocks mentioned. The Motley Fool recommends Apple, Facebook, and Google. The Motley Fool owns shares of Apple, Facebook, and Google. Phillip is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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