Google shrugs off $5.1 billion fine with another big quarter
July 24, 2018 10:40 AM NPT
SAN FRANCISCO, July 24: European authorities took their best swing, but it appears that Google hardly felt it.
Less than a week after the European Union fined Google a record $5.1 billion for abusing its dominance in the smartphone market, Google’s parent company, Alphabet, said Monday it had absorbed the cost of the fine and made $3.2 billion in profit in its latest quarter.
Alphabet’s stock rose 3.5 percent in after-hours trading, and some analysts recommended the company’s shares. With the regulatory issue settled, they said, Google could get back to focusing on selling ads across the internet.
“It’s like a delivery company having to pay for a parking ticket,” Brian Wieser, a Pivotal Research analyst, said of the penalty, which Alphabet accounted for in the second quarter. “It’s not a meaningful fine in the context of the size of this company.”
The European Union’s previous record fine was also aimed at Google, a $2.7 billion levy it imposed last year for unfairly favoring its comparison-shopping service in its search results. Google booked that charge in the same quarter a year ago — and posted a $3.5 billion profit.
More substantive than the fine are the changes that will come to the company’s Android software, which backs 80 percent of the world’s smartphones.
European authorities ordered Google to stop effectively requiring phone-makers in Europe to install Google’s search engine and Chrome internet browser on their devices in order to use the Android software.
Such a change could mean fewer people using Google’s search engine on their phones, which would undercut an advertising business that is fueled by users clicking on ads in mobile search results.
But it is Google that is responsible for crafting a remedy, and it will have much incentive to propose one that limits the effect on its business. After Google complied with last year’s charges by the EU related to its shopping service, competitors complained that its solution did little to reduce the harm to their businesses.
Google is “looking forward to finding a solution above all that preserves the enormous benefits of Android to users,” Google CEO Sundar Pichai said on a call with analysts Monday.
Europe’s new data-privacy rule, known as the General Data Protection Regulation, also appeared to have had little effect on Google’s bottom line. The law, which restricts how companies obtain and handle users’ information, sent many businesses scrambling to comply earlier this year. But some analysts believe Google and its partner in the digital-advertising duopoly, Facebook, stand to benefit from the rules because they can afford to comply while smaller competitors might not.
Wieser said that after reviewing Google’s earnings, the privacy rule “probably helped, at least in the European numbers.” Alphabet’s revenues rose 26 percent in Europe, Africa and the Middle East over the same period a year ago, though some of the increase was related to currency fluctuations.