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Mapping Out Google's Waze Deal

Stocks in this article: GOOGAAPL

NEW YORK ( TheStreet) -- There's never a dull moment with Google (GOOG).

Amid much speculation about what the company was going to do with its $50 billion cash hoard, now we know (at least) that $1.1 billion to $1.3 billion of that cash is allocated for Waze, a social mapping application that provides real-time information and alternative routes for drivers via GPS.

Assuming that this deal receives regulatory approval (I don't see why it wouldn't), Waze will add extra oomph to Google's already dominant maps application.

It's worth noting here that although this announcement was just made official on Google's blog, the financial terms of the deal have not been disclosed. The question everyone is asking is: Why Waze?

The way I see it, Waze's immediate contribution to Google is not the sole or immediate focal point of this deal. This is not to downplay Waze's potential. But I do believe that Google's immediate strategy was to keep Waze out of the hands of (among others) Apple (AAPL).

It's no secret that Apple's iPhone 5 map situation will go down as one of the biggest blunders in the company's history. Not only did the map failure prompt CEO Tim Cook to offer an immediate apology, but the embarrassment also resulted in the ouster of Scott Forstall, Apple's senior vice president of iPhone Software.


This entire situation ignited flames about how Apple was suddenly losing control of its brand. Google then stepped in and was proclaimed the most dominant tech company. The disappointment of Apple's "map-gate" presented the "I told you so" occasion that Google had been waiting for. Google seems intent on maintaining this lead.

Apple has since resolved the maps fiasco, but if Apple had gotten its hands on Waze, which (according to published reports) is used by nine out of 10 Israelis, the scales against Google maps would have become more balanced, if not tipped more in Apple's favor. Plus, we shouldn't discount how Waze could have benefited Apple's push for the connected car.

So this move by Google to pick off Waze is significant from the standpoint that Google was playing defense not only against Apple, but also against Facebook (FB), which had shown prior interest in Waze for a reported $1 billion.


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