For the last seven years, the European Commission investigated Google’s ($GOOG) alleged anticompetitive business practices. The commission felt Google’s Shopping service received priority placement in their search results over competing services. The company put Google Shopping results front and center, allegedly negating any reason for their users to visit other like sites.
After years of investigations, the European Commission ruled that Google did, in fact, violate antitrust and anticompetitive laws in the European Union. To compensate for this practice, the company must fix their search engine to treat all price comparison sites as equal, including their own. Yet in the eyes of the European Union, such a change is not enough. In addition, the American company will also have to pay a $2.7 billion fine — the largest antitrust fine ever ordered by the EU.
Losing an extra $2.7 billion could put most companies out of business. For Google, it’s a very annoying drop in the bucket. Yet even a mere $2.7 billion could still have some effect on the company’s future.
Alphabet has $92.4 billion to spare.
As of March 31st, the parent company of the California search giant has billions in cash reserves and marketable securities. By the time they pay the fine, they’ll have a little over $89 billion. Compare this to their 2016 revenue of $90.27 billion and net income of $19.47 billion, and you’ll find that $2.7 billion is a mere bump in the road for the company. They can and will appeal the decision, but have a slim chance of winning.
Google will also see decreased revenue from their Shopping service. The company can no longer give the price comparison tool preferential treatment, and will instead give competitors equal placement in search results. Nonetheless, Google Shopping isn’t the ultimate moneymaker for the company, and will no doubt have a minimal effect on their bottom line.
Alphabet shareholders don’t really care.
The company’s stock is currently down by 1.31%. Some investors believe the fine will hurt the company’s bottom line in the near future, which is why they’re selling their stock. Yet this decrease is likely a temporary one, as the loss of a few billion dollars and a decreased priority of an existing business probably won’t have much of an effect in the long run. Alphabet and Google have hundreds of different businesses bringing in billions of revenue, some that would make up for the fine well before the end of the year.
Should you invest in Alphabet/Google?
The majority of investors and analysts believe that Google is still a stock worthy of investors’ attention. Though the $2.7 billion is indeed a setback, chances of it impacting the company’s overall business are rather slim. After all, Alphabet and Google rake in close to $100 billion in revenue each year, with close to that in extra cash on hand. To them, $2.7 billion is pretty much nothing.
If you think Google will continue to prosper in the online search and ad space, as they don’t really have too many competitors, you could consider buying $GOOG yourself. You even have the chance to buy the company’s shares at a discount now that their stock took a hit from today’s news. Just be sure to do your research before you invest.
If you think today’s news will have more of an impact than believed, or if you think this is a sign of bad things to come for the company, simply invest elsewhere.