For those scoring at home it's now Apple (NASDAQ:AAPL) $393 billion and Alphabet at $420 billion, and since the numbers are for December, the margin is even greater, since Google has fallen less this year.
But uneasy hangs the crown, as they say. When you're on top, you have a target on your back and the view in every direction is down. The knives come out. And the knives are definitely out for Alphabet.
The knives in this case are being wielded by Oracle (NYSE:ORCL), which won what many programmers believe is the worst court decision since Citizens United. By having its Application Program Interface, or API, protected by copyright, Oracle was able to take an open source product, Java, and turn it into a closed source product. An API, which is a description of what software does, had not previously been considered protected.
How many billions Google will owe Oracle is still in court, and in order to goose that figure up Oracle has leaked word that Google has made $22 billion, on $31 billion in revenue, from its "free" Android operating system, which includes the code under discussion. The company also disclosed that Google paid Apple $1 billion to keep its search bar on the iPhone.
I know. If someone in a legal dispute with Oracle were leaking its secrets, selectively, Larry Ellison's reaction would make Kim Jong Un look like Tom Hanks. Be that as it may, the releases put a top on speculation about just how profitable Android is to the company, and has been. Plug that into the stock and you get a much better picture of things, which in turn could send the stock down.
To get Oracle off its back, Google is changing its implementation of Java, from the one it made to Oracle's OpenJDK, which remains open source. The change will be made in the next version of the operating system, currently called Android N.
Google is still highly profitable, and search continues to grow, but costs are rising, and not just in court. Google now has 1,000 people working at just stopping "bad" ads - phishing scams, counterfeit goods, etc. - off its sites. The so-called "right to be forgotten," created by European courts, requires more employees to administer, and the company's antitrust fight there has cost it an estimated $6 billion, so far. Europeans are desperate to create "their own Google," as Russia has with Yandex (NASDAQ:YNDX) and China has with Baidu (NASDAQ:BIDU), giving them the leverage to threaten it with virtual expulsion if it continues to defy their desires.
What all this says is we've reached "peak Google." That does not necessarily mean we have reached peak Alphabet. There are tons of opportunities that have yet to be fully exploited - everything from self-driving cars to video to health and augmented reality. But these are all speculative. Some will succeed, some will fail. None is making substantial contributions to Google's bottom line today.
I am not saying sell Google. I still have about as much invested in the company as I have invested in Apple, and in Amazon.com (NASDAQ:AMZN). I'm saying you should not expect to double your money here, barring a breakthrough, for many years. The stock will rise, but much more slowly than before, and when the company decides to finally do right by shareholders - splitting the stock further, adding a dividend, etc. - it will grow even more slowly.
Disclosure: I am/we are long GOOGL, AMZN, AAPL.
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.