Google's $625M Apigee Deal Marks AWS's Loss

Google has the technology to build out application programming interface (API) tools. It has the skills to develop an IoT platform. And it certainly has the creds for security (the Chromebook remains unhackable to date).

Yet today it announced a definitive agreement to acquire San Jose, Calif.-based Apigee, a company that offers all of the above and that has yet to turn a profit as a publicly-traded company. Google will pay $17.40 per share in cash for the company, for a total of $625 million, which Charles King, principal with Pund-IT told CMSWire, is a tidy sum.

Apigee boasts some 300 high-caliber customers that it works with to create numerous and in some cases highly customized application connections with elaborate back-end systems, a key component in delivering successful digital interactions.

King believes it is for this reason — the company’s unique, almost concierge-like approach to API — that Google is acquiring Apigee. 

Competing with AWS for the Cloud

“Google is trying very hard to differentiate itself from Amazon Web Services (AWS),” King said. “Apigee’s high quality of tools, its approach to security and its ability to support IoT, can help do that.”

Indeed, digital adoption and customer experience is only one part of what Apigee does — or to be specific, it is only one source of its revenues.

Apigee’s other major revenue source is the shift to the cloud. 

“Even if a company was not going to build any new digital applications but simply wanted to migrate their existing back-end applications from a mainframe or client/server system to a cloud system, that would create a variety of challenges in particular having to do with security, management and those type of issues that APIs could be the answer to solve how that works,” Kevin Faulkner, Apigee’s vice president of investor relations told the audience at the Stifel Technology Internet & Media Conference held this past June.

Apigee’s Many Attributes

Fresh from her appearance at BoxWorks, Senior Vice President of Google Cloud platform Diane Greene announced the buy in a blog post on Thursday, hitting all the high notes of Apigee’s long list of attributes.

She noted the hundreds of companies that Apigee has as clients, including Walgreens, AT&T, Bechtel, Burberry, First Data and Live Nation. Walgreens, she wrote, “uses Apigee to manage the APIs that enable an ecosystem of partners and developers building apps using Walgreens APIs, including the Photo Prints API (enabling mobile app developers to include the ability for their app users to print photos at any Walgreens store), and the Prescription API (enabling users to quickly order refills of prescriptions right from their mobile app).”

According to its quarterly report, Apigee added nine new Fortune 500 customers — including three in the Fortune 100 — in its latest quarter and also added two new customers from the Fortune Global 500.

Bye-Bye Joint Marketing with AWS?  

Greene also highlighted Apigee’s toolset and its security creds.

“A good API needs to support security, give developers the freedom to work in the development environment of their choice and allow the company to continue to innovate its service while supporting a stable interface to the apps and services using the API,” she wrote.  

“Google cloud customers are already benefitting from no sys-ops dev environments, including Google App Engine and Google Container Engine. Now, with Apigee’s API management platform, they’ll be able to front these secure and scalable services with a simple way to provide the exported APIs,” she concluded.

As for AWS? Somehow, one might conclude that Apigee’s services may no longer be quite so available on its platform. If so, this could pose a setback for Amazon.

Apigee has delivered a reference architecture for AWS deployments, and has also entered into joint marketing with AWS. 

And then there are the customers, which include some marquee names. “Recently, Amazon and Apigee announced dozens of new customers using Edge in AWS, including AccuWeather, Allstate, OpenGov and Sage Payment Solutions,” Apigee CEO Chet Kapoor said during the company’s earnings call.

Which clients will leave with Apigee is yet to be determined, but Google will acquire the technology, the team and Apigee clients when the deal is finalized. The transaction is expected to close by the end of the year, subject to customary closing conditions, including regulatory approval and approval by Apigee shareholders.