These New Red Flags Should Alarm Google Investors

| About: Alphabet Inc. (GOOG)

The European Commission (NYSE:EC) has given Google (NASDAQ:GOOG) until July to think up its defense for the anti-trust probe currently underway.

Google has been accused of abusing its power in the market. The EC has given the company about a month to think up ways to "change its business to be less threatening to competition". Clearly this is not a good thing for the company nor its stock. Being a strong competitor is what has kept Google on top for so long. Decreasing its power over other similar companies will obviously have a negative long-term effect. However I feel that the company's power is so great that it will still be a good option to back even considering these developments.

Google should use this time it has been given to think up ways to deal with the situation that will have the best outcome for the company itself. This includes avoiding a long and drawn out lawsuit into its business practices. A month is not a very long time in business, but I feel that Google will be able to make the most of the time that has been given to it.

Google stands accused of abusing its power and breaching competition laws in web searching as well as in advertising. Several firms have come forward stating that Google has been manipulating its search results so that its own sites receive preference over those of other companies. In addition, it has been accused of copying things such as restaurant reviews from other sites without their permission. In total, 16 complaints of this nature have been leveled against Google. Any average Internet user would most likely agree with this assertion.

Google is certainly the strongest force in these domains. However, the question is whether it is simply the best at what it does, or if it is indeed abusing its power. The chances are high that it is the former, so, again, I feel that Google should do everything it can to minimize the situation before it gets blown up. If Google does not concede to the European Commission and put forward solutions to the problem, a battle between the EC and Google could erupt. Bad press is never good for a company. Bad press specifically related to anti-trust issues can have an extremely negative impact on the way investors and the public view the stock.

If Google is unsuccessful at presenting the EC with the ideas that it demands, it will have to pay an enormous fine consisting of up to 10% of its global turnover. The probe has already been going on for about 18 months. Google should definitely take this opportunity to put an end to the situation and minimize the backlash. As of very recently, there will still no reports of Google's reply to the ultimatum that it has been presented with. The only thing we know is that Google denies wrongdoing.

Google is in another battle, this time with Microsoft (NASDAQ:MSFT) for a stake in the government cloud market. Although Google is a major competitor in this field, and although it has signed some significant deals with governmental departments, such as the Department of The Interior, Microsoft is catching up. Recently Microsoft achieved a huge symbolic win when the Federal Aviation Administration (FAA) chose Microsoft cloud software over that of Google's. The problem is not only one of fighting for market territory; lawsuits have also been filed by each company as they battle for the attention and custom of the U.S. government.

Facebook (NASDAQ:FB) has made an interesting play in that it has introduced a new mobile app store through which users will have access to around 600 apps. The company will be able to generate revenue from this as every time a purchase is made, Facebook will receive a portion of the revenue. This is an indication of the company's awareness that it needs to start making money from its mobile users in order to stay afloat. Facebook is clearly making a play to enter into the "app market" alongside Google and others. This will give it a chance to earn some profit, but perhaps more importantly, open itself up to user innovation and drive. More people will look toward Facebook to make money, which the company hopes will change its profitability model.

Mobile competitor AT&T (NYSE:T) may have the right idea with its new partnership with Acclaim Energy Advisors. This partnership will result in an improved service for its Texas-based business customers during times of power failures. This makes the stock look very good indeed in comparison to its competitors who are functioning at a similar level. People want safety from emergencies such as power failures and they are far more likely to support companies that provide this safety, making this a very sensible move on the part of AT&T, in my opinion.

Nokia (NYSE:NOK), a competitor as far as smartphones go, is investing a lot into its new Lumia range in India, and we can only hope that this is an endeavor that will turn out for the best for the company. Recently, it announced that it will expand its Lumia range. There was a lot of skepticism involved with this range of phones when they first came out. I am still not certain if this is the right way for Nokia to catch up with its top competitors in the mobile phone market once more. However it is at least a strategy and, you never know, the Lumia mobile devices that Nokis is introducing may take off in a big way.

Things are not looking good for Google. The biggest worry is that other competitors may take advantage of its current weakness to get ahead of the game. Investors and the public will also look less favorably on the search engine giant. However, I think that Google is unlikely to weaken to the point where it can no longer offer profits for its investors.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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