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EU to Resolve Google Antitrust Cases in the Next Few Months
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The European Commission (EU) will finally close its year-long investigations into Alphabet Inc.’s (GOOGL - Free Report) antitrust cases.
Per a Reuters report on Monday, EU is gearing up to deliver verdicts in the "next few months" on whether Google misused its dominance in Internet searches, advertisement and other areas to hurt its competitors.
The first case was related to Google favoring its shopping service over those of rivals; the second was for using the Android platform to force hardware makers to bundle Google services and prevent the preloading of rival services on the devices; and the third involved restricting access to ads provided by its competitors, which hit its core AdSense business.
The Commission's chief competition economist Tommaso Valletti stated that "In the next few months, we will reach a decision on the Google cases, Google search, AdSense and to me the most interesting is Android."
If Google is found to have violated the rules, it might have to pay penalties of up to 10% of its worldwide revenues, which was $90 billion in 2016, for each case.
A number of technology giants have run into trouble with the Commission over the years. Microsoft (MSFT - Free Report) received a landmark judgment in 2004. More recent targets of the Commission include Amazon (AMZN - Free Report) , for e-book deals, Apple (AAPL - Free Report) , for its tax practices; and Facebook and Twitter, for hate speech on their platforms.
Should Investors Worry?
Sometimes one’s greatest strength can turn into a weakness if the context changes. Google’s search technology has created win-win situations over the years, benefiting buyers, sellers and the public at large. The success of this strategy led to strong growth for the company and gave it a near monopoly advantage.
On the flipside, this dominant position in search has made Google increasingly vulnerable to litigation all over the world, especially in Europe. To make matters worse, Britain decision to exit from the EU comes as a blow. As a result, the company will no longer be able to make use of its more lenient rules on privacy and taxes.
Also, with Britain’s exit from the EU, Germany and France, the two countries that have proved particularly difficult for Google, will assume greater influence. So operating in Europe will get tougher before it gets better.
If the verdicts do not go in Google’s favor, it will be a huge drain on its resources and also earn it a bad name. The company so far has had extraordinary success in the courtroom and with government officials around the world. So, for investors, it is worth keeping an eye on the developments to see if Google’s streak of “good luck” continues when the Commission concludes the cases.
Alphabet has had an impressive run on the bourse over the last one year. The company gained roughly 31.5%, higher than the Zacks categorized Internet-Services sub-industry’s addition of about 21.3%.
We believe that Google offers investors a lot more to cheer that to worry. Google has shown good execution to date. Its search market share is a big positive, which along with its focus on innovation, strategic acquisitions and Android OS continues to generate strong cash flows.
Google continues to adapt and change on the strength of its technological prowess. Not only did it take the mobile market transition in its stride, but also started developing machine learning and artificial intelligence for the future.
As a result, it was able to turn over some search functions to its AI systems. Even its major innovations outside the core search business such as voice-controlled platforms, self-driving cars, cloud computing and drones are now being driven significantly by machine learning.
As Alphabet generates significant cash from operations and also holds a huge cash balance, management has the flexibility to pursue growth in any area that exhibits true potential. It will continue to launch products and services for multiple industries. We believe that the company has the financial muscle to overcome any short-term headwinds and continue pursuing its initiatives.
Before looking into the stocks mentioned above, you may want to get a head start on potential tech IPOs that are popping up on Zacks' radar. Imagine being in the first wave of investors to jump on a company with almost unlimited growth potential? This Special Report gives you the current scoop on 5 that may go public at any time.
Image: Bigstock
EU to Resolve Google Antitrust Cases in the Next Few Months
The European Commission (EU) will finally close its year-long investigations into Alphabet Inc.’s (GOOGL - Free Report) antitrust cases.
Per a Reuters report on Monday, EU is gearing up to deliver verdicts in the "next few months" on whether Google misused its dominance in Internet searches, advertisement and other areas to hurt its competitors.
The first case was related to Google favoring its shopping service over those of rivals; the second was for using the Android platform to force hardware makers to bundle Google services and prevent the preloading of rival services on the devices; and the third involved restricting access to ads provided by its competitors, which hit its core AdSense business.
The Commission's chief competition economist Tommaso Valletti stated that "In the next few months, we will reach a decision on the Google cases, Google search, AdSense and to me the most interesting is Android."
If Google is found to have violated the rules, it might have to pay penalties of up to 10% of its worldwide revenues, which was $90 billion in 2016, for each case.
A number of technology giants have run into trouble with the Commission over the years. Microsoft (MSFT - Free Report) received a landmark judgment in 2004. More recent targets of the Commission include Amazon (AMZN - Free Report) , for e-book deals, Apple (AAPL - Free Report) , for its tax practices; and Facebook and Twitter, for hate speech on their platforms.
Should Investors Worry?
Sometimes one’s greatest strength can turn into a weakness if the context changes. Google’s search technology has created win-win situations over the years, benefiting buyers, sellers and the public at large. The success of this strategy led to strong growth for the company and gave it a near monopoly advantage.
On the flipside, this dominant position in search has made Google increasingly vulnerable to litigation all over the world, especially in Europe. To make matters worse, Britain decision to exit from the EU comes as a blow. As a result, the company will no longer be able to make use of its more lenient rules on privacy and taxes.
Also, with Britain’s exit from the EU, Germany and France, the two countries that have proved particularly difficult for Google, will assume greater influence. So operating in Europe will get tougher before it gets better.
If the verdicts do not go in Google’s favor, it will be a huge drain on its resources and also earn it a bad name. The company so far has had extraordinary success in the courtroom and with government officials around the world. So, for investors, it is worth keeping an eye on the developments to see if Google’s streak of “good luck” continues when the Commission concludes the cases.
Alphabet Inc. Revenue (TTM)
Alphabet Inc. Revenue (TTM) | Alphabet Inc. Quote
There are Reasons to Cheer Though
Alphabet has had an impressive run on the bourse over the last one year. The company gained roughly 31.5%, higher than the Zacks categorized Internet-Services sub-industry’s addition of about 21.3%.
We believe that Google offers investors a lot more to cheer that to worry. Google has shown good execution to date. Its search market share is a big positive, which along with its focus on innovation, strategic acquisitions and Android OS continues to generate strong cash flows.
Google continues to adapt and change on the strength of its technological prowess. Not only did it take the mobile market transition in its stride, but also started developing machine learning and artificial intelligence for the future.
As a result, it was able to turn over some search functions to its AI systems. Even its major innovations outside the core search business such as voice-controlled platforms, self-driving cars, cloud computing and drones are now being driven significantly by machine learning.
As Alphabet generates significant cash from operations and also holds a huge cash balance, management has the flexibility to pursue growth in any area that exhibits true potential. It will continue to launch products and services for multiple industries. We believe that the company has the financial muscle to overcome any short-term headwinds and continue pursuing its initiatives.
Alphabet currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Zacks' 2017 IPO Watch List
Before looking into the stocks mentioned above, you may want to get a head start on potential tech IPOs that are popping up on Zacks' radar. Imagine being in the first wave of investors to jump on a company with almost unlimited growth potential? This Special Report gives you the current scoop on 5 that may go public at any time.
One has driven from 0 to a $68 billion valuation in 8 years. Four others are a little less obvious but already show jaw-dropping growth. Download this IPO Watch List today for free >>