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Google Ties Up With Orange, Strengthens Footprint in EMEA

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Alphabet’s (GOOGL - Free Report) Google is leaving no stone unturned to improve its investment activities and reap benefits from investments in potential companies.

Reportedly, the company teamed up with Orange Digital Ventures, the corporate venture arm of a France-based telecommunication firm Orange, to make investments in startups based in Europe, Middle East and Afirca (EMEA).

Orange witnesses almost 1200 companies pitching for investment every year. This is a big number and bodes well for Google’s strong focus toward gearing up its investment activities.

Orange’s investment sourcing and techniques will aid Google in discovering significant investment opportunities in the EMEA region and eventually lead to acquisitions.

These endeavors will help the company to gain momentum in the market. Further, the partnership with Orange will enrich Google’s investment capability.

Coming to the price performance, shares of Alphabet have returned 13% over a year, outperforming the industry’s rally of 2.8%.



Gains from the Partnership

The latest move is in sync with Google’s focus on global expansion.

Per the deal, Google and Orange will focus primarily on startups belonging to tech sector, especially on the emerging trends of cybersecurity, cloud services, AI, internet of things, fintech and connectivity solutions industry.

Consequently, the company will strengthen presence in EMEA region by investing and acquiring companies hailing from the region. Moreover, the acquisitions will help in expansion of Google’s product portfolio in these sectors.

According to Gartner’s report, IT spending in EMEA region is expected to hit $1 trillion in 2018, reflecting growth of 4.9% from 2017. We believe investment in tech sector of this region holds great potential for significant returns in the future.

Strengthening Presence in EMEA Region

Google’s strong focus toward expansion of its business in EMEA region will continue to help it in reaping benefits from this region.

Per the data from Statista, Google generated 33 percent of its total revenues from EMEA region in 2017.

Recently, the company announced an investment of EUR 150 million for the expansion of its data center based in Dublin. This will aid the job creation in that region and allow the company to scale up its cloud services in EMEA.

Further, the company is planning to launch Google Cloud in Switzerland. The Swiss zones are expected to be unveiled in 2019.

Last month, the company introduced a new search app in 26 African countries which will lessen the user’s cost and tackle the problem of slow internet speed. Further, Google partnered with Convergence Partners, International Finance Corporation and Mitsui last year to invest $100 million in CSquared, an African wholesale broadband company.

Additionally, Google is likely to consider the development of an R&D and a training center in Saudi Arabia after the country’s Prince met and discussed about these developments with Google’s CEO, Sundar Pichai and Alphabet’s president Sergey Brin.

We note that Google is likely to benefit from the emerging tech market of EMEA.

Zacks Rank & Stocks to Consider

Currently, Alphabet carries a Zacks Rank #3 (Hold).

Some better-ranked stocks that can be considered in the broader technology sector are Baidu (BIDU - Free Report) , Match Group (MTCH - Free Report) and The Trade Desk (TTD - Free Report) . All the three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Baidu, Match Group and The Trade Desk is currently pegged at 21.7%, 12.5% and 22.5%.

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