Google (NASDAQ:GOOG) has filed a complaint with the European Commission against Nokia (NYSE:NOK) and Microsoft (MSFT) claiming that Microsoft and Nokia as well as other technology companies are conspiring together to wage a patent war against Google and the Android software that powers Google's smartphones. Google believes that proxy companies, owned by Microsoft and Nokia, have tried to stall manufacturing and development of Android smartphones by filing patent infringement lawsuits against Google. Google contends that companies are colluding together to gain market share of future smartphones. Currently, Nokia and Microsoft are teamed together to develop and build a smartphone that runs on Microsoft Windows Phone software. The latest market share numbers on smartphones had Google dominating worldwide with over 53%, Apple controls 15% and Microsoft only has about 2% of the smartphone market. Google has also mentioned that it will also pursue the allegations with U.S. regulators like the Justice Department and the Federal Trade Commission.
Google and the Patent Infringement Wars
Currently patent infringement lawsuits are a hot topic in the litigation world and the technology world. Technology companies want to license patents in order to increase revenues through licensing fees. Companies like Nokia, Microsoft, Oracle (NYSE:ORCL), Research In Motion (RIMM), Samsung Electronics and Motorola Mobility, which is now owned by Google, have brought a flurry of patent infringement lawsuits against competitors to gain an edge or stall development of application and software development.
Google wins against Oracle
It has been a week since Google was exonerated by Judge William Alsup with regards to Oracle's patent and copyright infringement lawsuit. The verdict in Google's favor eliminated a possible $1 billion payout to Oracle for such infringements.
Google prepares for E book claims
In other developing litigation that concerns Google, a U.S. Circuit Judge Denny Chin in New York dismissed Google's claim that the lawsuit filed by Author's Guild and American Society of Media Photographers as well as others over electronic books lacked sustenance. Judge Chin ruled in favor of the lawsuit going forward and that the Author's Guild would be one of three plaintiffs to argue the case against Google in a nationwide class action suit. Judge Chin believed the scope of the copyright infringements were broad in spectrum and will force Google to litigate against a single class action suit instead of individuals.
Google's legal team still argues that the company is in full compliance with copyright laws and believes that the ruling has no underlying effects on the case going forward.
Federal Trade Commission may probe into Google
Another possible lawsuit against Google is the threat of the Federal Trade Commission filing an antitrust lawsuit. The Federal trade Commission is claiming that Google has a monopoly on search engines. The government claims over 66% of all Internet searches are conducted through Google. The Federal Trade Commission has not yet decided whether to file the antitrust suit but recently the government hired a special prosecutor to litigate the case. If the government does move forward it will be a massive case against a Silicon Valley giant reminiscent of the case brought against Microsoft some 14 years ago. Many legal analysts believe the hiring of Beth A. Wilkinson is similar to the government hiring of outside counselor David A. Boies in the Microsoft antitrust suit.
The major problem for the government is the fact that it is difficult to prove wrong in an anti-trust case. The government contends that Google has manipulated its search engine technology to eliminate competition from Yahoo and Bing as well as other start-up search engine companies. In addition, antitrust litigation requires the government to prove that Google abused it monopoly powers. So in essence, the government could prove that Google is a monopoly but the final verdict will be mute if the government can not prove that Google abused its monopoly standing.
But in general the lawsuit could be a nightmare for Google with regards to records that will be open to the public through the subpoena process and endless testimony by high level executives. Another problem for Google, if the government does go forward, with the lawsuit is that its image will be tarnished and the technology giant will need to use resources to defend themselves. Not only will valuable resources be gobbled up in litigation, Google may also face a period of stagnation in technology innovation. A person could argue that the Microsoft settlement in 2004 was actually toothless but what really hurt Microsoft was the time the company lost in research and development moving forward. Microsoft was left in the dust during the time frame between 1998-2004 when Google became the Internet search king and Apple became the leader in music and media.
The Future of Google
I understand the average investor is asking where Google goes from here. Google has systematically engaged in business practices that it has defended successfully in courts for years. Case in point its victory over Oracle and Java API patent infringement. Google, like the rest of the current market, has been in a steady decline since May 2012 but the stock is still $100 higher than its 52-week low. I believe the stock will find support around the $550 price mark but with the fear of an European melt down in the market some people who have leveraged Google may have been forced to sell to cover losing positions. This is unfortunate for those people but it is a buying opportunity for the next person.
Good investors always buy good, solid companies during dips in the market and make lots of money. I think with a dip in price this big; a person should feel comfortable buying Google at around $573 and riding the European storm out. Even though the market is down does not mean that Google is out. Google is still earning $33 per share and carries a forward price to earnings of 11 at the $570 level with an additional of $48 billion in cash. Android system sales are still very high in the tablet and smartphone areas and only Apple has made progress on gaining market share.
I do not think now is the time for an investor to pull the plug on Google. Rather, now is the time to buy. The problems with Europe and a possible slow down will ease with time but there are not many times a person can buy a quality company at a cheap price. Now is the time to buy.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.