Will Google Acquire Hubspot And Enter The SaaS Business?

Inbound marketing specialist HubSpot (HUBS) recently reported its first-quarter results that continued to outpace market expectations. The company is seeing strong interest in the market because of talks about its acquisition by Google.

 

HubSpot’s Financials

HubSpot’s first quarter revenues grew 23% to $617.4 million, ahead of the Street’s forecast of $598 million. Non-GAAP EPS of $1.68 grew 40% and beat the market’s estimate of $1.50.

By segment, subscription revenues grew 23% to $603.8 million and Professional services and other revenues improved 15% to $13.6 million.

Among other operating metrics, the number of customers grew 22% to 216,840. Average Subscription Revenue Per Customer grew 1% to $11,447.

For the second quarter, HubSpot forecast revenues of $617-619 million and an EPS of $1.62-$1.64. The market was looking for revenues of $623 million and an EPS of $1.57.

HubSpot expects to end the year with $2.55-$2.56 billion and an EPS of $7.30-$7.38. The market was looking for revenues of $2.565 billion for the year.

 

Google’s HubSpot Acquisition Talks

The market is abuzz with news that Google is in talks to acquire HubSpot. If the rumors were true, and the deal were to go through, HubSpot, valued at $33 billion would be Google’s biggest ever acquisition.

It will also mark Google’s entry into the cloud apps market, a territory dominated by the likes of Oracle, SAP, Salesforce, Workday, Adobe, ServiceNow, and Atlassian. I think it could follow it up with a string of acquisitions. Google would also emerge with a very different competitive landscape for their business. I think this is a very good strategy.

Google is also probably looking at HubSpot to compete with Microsoft, especially its Dynamic 365 products. Google is already competing with Microsoft’s Office platform through its Workspace collaboration offerings. Buying HubSpot would help Google compete with the CRM sector, which Microsoft addresses with its Dynamics 365 products.

Google is a highly profitable company and recorded a net income of 34% or $23.66 billion last quarter. It ended last quarter with cash, equivalents and marketable securities of $108 billion. That is tons of dry powder to acquire a variety of interesting SaaS players.

Neither Google nor HubSpot management has commented on the deal.

HubSpot’s stock is trading at $567 with a market capitalization of $28.9 billion. It touched a 52-week high of $693.85 soon after the rumor of the acquisition broke out last month. It hit a 52-week low of $407.23 in October last year.


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Disclosure: All investors should make their own assessments based on their own research, informed interpretations, and risk appetite. This article expresses my own opinions based on my own research ...

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