Google Hit With $5 Billion EU Fine As CEO Pichai Fires Back On Android – Investor's Business Daily

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European antitrust regulators hit Google parent Alphabet (GOOGL) with a record $5 billion fine on Wednesday, charging that the internet giant has used its Android mobile phone operating system to bully smartphone makers.


The company said it will appeal the fine in European Union courts.

“Today’s decision rejects the business model that supports Android, which has created more choice for everyone, not less. We intend to appeal,” Google Chief Executive Sundar Pichai wrote in a blog.

Google stock slipped a fraction to close at 1,212.91 on the stock market today. Google stock ventured into positive ground for most of the trading day.

“This fine is within the range of expectations and well-telegraphed to the market,” said Brian White, an analyst at Monness, Crespi, Hardt & Co., in a report.

Funds On Hand

Though Google is appealing, the cash-rich internet giant has enough funds on hand to pay the fine.

“Google has $105 billion in net cash on its balance sheet,” said Mark Mahaney, a RBC Capital analyst in a report. “So after this fine, Google will have $100 billion.  That’s a lot.”

The EU hit Google with a $2.7 billion penalty last year. At that time, Europe’s regulators said Google skewed search results. They claimed it did so to benefit its own shopping-search service vs. those of rivals. Google has paid the $2.7 billion fine.

The EU on Wednesday gave Google 90 days to stop what it called “illegal practices” on contracts with handset manufacturers that push Google services in front of users.

“The (EU) decision ignores the fact that Android phones compete with (Apple (AAPL)) iOS phones, something that 89% of respondents to the commission’s own market survey confirmed,” Pichai said in the blog. “It also misses just how much choice Android provides to thousands of phone makers and mobile network operators who build and sell Android devices; to millions of app developers around the world who have built their businesses with Android; and billions of consumers who can now afford and use cutting-edge Android smartphones.”

Did Google Bully Smartphone Makers?

European regulators say Google has forced smartphone makers to pre-install its suite of apps in order to gain access to the Google Play store. Google’s actions reduce the incentives for manufacturers to install competing apps, the EU said.

“From a debundling impact perspective on the business, we expect minimal impact as the consumer is likely to just simply download the apps for Google’s services if and when they get new Android phones — much as they already do when they get new (Apple) iPhones,” said Stephen Ju, a Credit Suisse analyst in a report.

The U.S. Federal Trade Commission in 2013 ended a Google probe after the internet search giant agreed to voluntarily change its business practices.

Google stock is up 22% from a year ago.


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