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Google’s relatively high earnings per share ratio ($32.99) will interest many investors, with their beta rating (1.08), which measures a stock’s volatility relative to the market, is only slightly above the market average (1.00). These significant indicators identify Google of being in financial strength within the market.
However, with the on-going investigations which could lead to a payment of fines, affecting their EPS and their Beta rating subject to change as Google’s current earning and futures sales are based on a wide range of potential outcomes.
A major issue currently confronting Google is the European Commission’s (EC) ruling on an investigation into anti-trust concerns. European Union regulators, as well as many competitors, argue that Google may favour its own search services over its rivals.
The EC investigation looked into accusations that Google copied and used travel and restaurant reviews from other websites without permission. Google’s advertising deals with other websites are also being investigated to see if they excluded rivals.
The final claim in the investigation is that Google’s contractual restrictions hindered advertisers from advertising on other search engine websites. Google was notified of the investigation and submitted its proposed concessions ahead of the deadline in order to avoid a fine that could be as high as 10% of last year’s revenues (almost $4 billion).
Depending on the Commission’s ruling, this could either be a huge relief or a serious financial hit that will definitely affect Google’s share price.
Another potential source of trouble for Google is the on-going probe pertaining to its recent acquisition of Motorola Mobility. The Federal Trade Commission is investigating whether Google is blocking its competitors to smartphone technology patents.
It is also investigating Google’s intentions to licence 3G wireless and video streaming technologies on reasonable terms. While neither of these investigations is completed, both could pose serious financial threats if Google is found guilty.
The present investigations may cause some trouble for Google, however the internet search company is still focused on taking on its biggest competitors and expanding its market share. Whilst Google’s Android operating system maintains the highest market share of smartphones, the biggest announcement regarding this issue is the upcoming release of a Google tablet, the Nexus 7.
Slightly smaller than the iPad, this tablet will provide many of the same services and is considered to be an improved version of Amazon’s tablet, the Kindle Fire, which is currently the best-selling tablet on the market. The Nexus 7 will offer Android’s newest operating system, Jellybean, and will start shipping in the end of July 2012.
Google estimates that the number of Android devices used has multiplied by four in the last year, representing significant growth and increased market share. The release of this tablet will hopefully bring customers to Google’s version of the iTunes store, Google Play. Users will be able to download music and applications, rent or buy television shows and movies, and share information among all of their electronic devices.
Furthermore, Google is rumoured to be negotiating with banks and credit card companies to improve its mobile payment system, Google Wallet. Although it hasn’t had the desired success yet, any potential partnerships with banks could boost its usage significantly.
As Google has plans to confront competitors such as Apple, Amazon, and Microsoft with its new operating systems and tablet, these companies are also creating products to compete with Google’s strongest services. First, Apple is developing its own mapping service to replace Google Maps, which is currently pre-loaded on all iPhones and iPads.
Given that this demographic represents nearly half of all Google Maps users, Google will be forced to explore other opportunities. Additionally, Amazon just bought a mapping start-up company, UpNext, which may be a sign that they are interested in integrating themselves in the mobile device and smartphone market of increased competition between these three companies.
Amazon’s Kindle Fire does not currently offer global position system services so, at the very least, this acquisition will make them more competitive with other tablets, including Google’s new Nexus 7. Digital maps and direction services have become an area of intense competition among some of the largest technology companies in recent months.
It will be interesting to see what the future holds for Google!!
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