Google Scores Starlink Partnership With SpaceX

Alphabet (NASDAQ: GOOG) subsidiary Google (NASDAQ: GOOGL) announced on Thursday that it had scored a partnership with Elon Musk’s rocket company SpaceX to help power Starlink.

SpaceX has been deploying Starlink satellites that will beam internet connectivity down to Earth as part of a growing constellation of satellites, and SpaceX recently disclosed that it has over 500,000 orders.

Here are the details for Google’s new deal with SpaceX.

Powering space internet

The search engine giant’s Google Cloud unit will help deliver networking services like data, cloud services, and applications to the Starlink network. SpaceX will start to install Starlink ground stations inside of Google’s data centers in order to facilitate low-latency connections that will be more secure and reliable. There are currently over 1,500 Starlink satellites in orbit.

By leveraging Google Cloud’s high-capacity private network, Starlink can deliver its satellite internet service to just about anywhere, according to Google. The companies said that Starlink will be ideal for organizations that have broad footprints or operate in rural and remote regions, since those areas have historically been difficult for traditional internet service providers (ISPs) to reach in a cost-effective manner.

“Combining Starlink’s high-speed, low-latency broadband with Google’s infrastructure and capabilities provides global organizations with the secure and fast connection that modern organizations expect,” SpaceX COO Gwynne Shotwell commented in a statement. “We are proud to work with Google to deliver this access to businesses, public sector organizations, and many other groups operating around the world.”

The integration between Google Cloud and Starlink is expected to roll out in the second half of 2021. No other terms were disclosed, but the length of the contract could be up to 7 years, according to CNBC.

Two partners are better than one

SpaceX is working with multiple cloud vendors, as Microsoft (NASDAQ: MSFT) had announced in October that it also inked a deal with the company to help power Starlink with Azure. It seems unlikely that SpaceX would tap Amazon.com (NASDAQ: AMZN) to use Amazon Web Services (AWS), as Elon Musk and Jeff Bezos have a longstanding rivalry.

Bezos’s rocket company, Blue Origin, competes directly with SpaceX for commercial launches, and the richest man on the planet once tried to poach Shotwell many years ago, according to an upcoming book about Amazon.

Narrowing losses

The news is a major win for Google, which has been competing aggressively to chip away at AWS and grow its cloud business. SpaceX and Google also have many other ties. Musk has long been personal friends with Alphabet founders Larry Page and Sergey Brin, and Google invested $900 million in SpaceX back in 2015 through its venture arm.

Google Cloud has become increasingly important to the search juggernaut’s financial results, and Google finally disclosed Google Cloud operating losses for the first time in February. The new reporting structure came about a year after Google first started reporting Google Cloud revenue.

Google Cloud posted $14.6 billion in operating losses between 2018 and 2020, and the cloud computing business lost another $974 million in the first quarter. That was down from over $1.7 billion in operating losses in the first quarter of 2020.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Evan Niu, CFA has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares) and Alphabet (C shares). Millennial Money is part of The Motley Fool network. Millennial Money has a disclosure policy.

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