EU’s Record Fine Of €4.3bn Shrugged Off By Alphabet in Second Quarter Results

The shares of Google’s parent company Alphabet were set on course to achieve an all time high after the company reported very encouraging second-quarter results and surpassed Wall Street expectations.

Nearly two thirds of the profit of the company was wiped out as the company accommodated a charge of $5.1 billion as a cover for the record fine that has been slapped on the company by European Union anti-trust regulators, Alphabet confirmed. However, underlying profit was nearly 22 per cent better than analysts expected.

Investors reacted by sending Alphabet shares up by as much as 5.2 per to $1,274.16 in after-hours trading in New York.

Alphabet is one of the largest tech companies in the world and is valued at $838 billion. the company is closing in on Amazon, the ecommerce giant which is also the second largest publicly traded company in the world valued at $874 billion. Apple is the first with a valuation of $944 billion.

Smartphones, life sciences, cloud computing and self-driving cars are among the business interest of Alphabet. However, the driver for profits of the company are advertisements revenues generated from its Google search engine, YouTube video-sharing network and other digital platforms. According to Emarketer, about 31 per cent of the global online advertising market would be controlled by Google in 2018.

It has been several years that a fight has been brewing between Alphabet and Google and the European commission’s competition regulator Margrethe Vestager. The commission fined Google €4.3 billion last week on charges of abuse of the dominant market position that is enjoyed by the company by its Android mobile operating system. and it has been just about a year that vertager has fined the company €2.4 billion for violating competition rules and illegally favouring its own shopping search service and putting on the back ground those of its rivals. Both the rulings are being appealed against by Google.

Against a revenue $32.7 billion in the quarter from $26 billion in the same quarter last year, the company reported an increase in profit at $8.3 billion this year from $6.3 billion ion 2017 while excluding the charges caused by the fines. Revenue generated was about $500 millio0jn more than the analysts had forecast.

Daniel Ives, of GBH Research, said: “While regulatory clouds and margins continue to be overhangs on the name, we believe advertising and bread-and-butter search revenues were healthy and a good barometer of potential strength.”

Last week, Vestager had said that Google had placed “illegal restrictions” for the use of Android to seal its dominant position in the online search market. Android is the most used and most popular mobile operating system in the world.

The earlier fine on the company was imposed on June 27 following a seven year investigation when the commission had ruled the Google had misused its dominant position as the most popular search engine in the world by providing an advantage to its application Google Shopping, in an unfair manner.

(Adapted from TheTimes.co.uk)

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Categories: Economy & Finance, Regulations & Legal, Strategy, Sustainability, Uncategorized

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