FTC Will Make Google A Buy Candidate

| About: Alphabet Inc. (GOOG)

Google (NASDAQ:GOOG) is about to get onto a roller-coaster that will offer you a great buying opportunity.

The downdraft will start with FTC and EU lawsuits against the company, which can be expected very soon. Google CEO Eric Schmidt has been trying to negotiate a wrist-slap settlement, something short of a consent decree. But he's at the point of the Law & Order episode when the defense attorney argues against jail time while the prosecutor hands out an indictment on second degree murder.

Lawsuits are the most likely outcome, and the reason for that is Europe. To Europeans, Google is a foreign company and an easy target. Efforts by Germany to make it pay publishers for links follow a similar effort in France. Regulators across the continent are pushing for higher taxes and an end to the company's use of tax havens.

For Europe, antitrust represents another pressure point that can be used to take Google down a notch and (they hope) lead to the creation of Europe-based competition. That's a vain hope - we're far too far into the search game for that - but piling on the search giant seems to be the way for Europeans to go, at least for the money. As a result you have a good-cop bad-cop scenario building, with American regulators as the good cops, but European regulators driving the train.

Beyond all this, however, Google remains a major buy. Its purchase of Incentive Targeting gives it a great way to monetize mobile. I believe it has a big cost advantage over Amazon.Com in the cloud and (interesting) it's being especially aggressive in courting Europe, giving it a pressure point of its own to counter government action against it there.

Google's secret sauce, and its profit story, remain intact. The secret sauce is that it's the cheapest way to do any Internet thing - not just search but file delivery and "big data" computing. The profit story lies in its continuing efforts to monetize that advantage, understanding that most of that money will fall to the bottom line because the investments needed to generate the revenue have all been made.

So cheer on the regulators, and watch Google fall. Then get back into it, or do what I plan on doing and go in further.

Disclosure: I am long GOOG. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.