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Google parent Alphabet on Monday reported a quarterly
profit of 3.5 billion US dollars, in a sharp decline from a year ago,
with a massive fine by the European Commission biting into earnings.
The
technology giant reported that revenue grew to 26 billion US dollars in
the recently ended quarter, and that profit would have tallied nearly
6.3 billion US dollars if it weren't for a 2.74 billion US dollars
antitrust fine levied on search engine Google by the European
Commission.
The earnings for the quarter fell 28
percent from the same period last year. Revenue was up 21 percent from
the same quarter last year. Alphabet chief financial officer Ruth Porat
said the report showed "strong growth with significant underlying
momentum," as the company makes "focused investments in new revenue
streams."
Alphabet shares slid about 2.9 percent to 969.03 US
dollars in after-market trades that followed the release of the earnings
figures. Investors have been concerned about what the regulatory
trouble in Europe means for Alphabet, which gets most of its money from
Google advertising while investing in "other bets" such as self-driving
cars.
Alphabet took in 248 million US dollars in
revenue and posted a narrowed loss of 772 million US dollars in its
"other bets" category in the recently ended quarter.
and the EU are gearing up for a battle that could last years, with the
Silicon Valley behemoth facing a constant challenge to its ambition to
expand beyond search results.
Brussels has already spent seven years targeting Google,
fueled by a deep apprehension of the company's dominance of Internet
search across Europe, where it commands about 90 percent of the market.
In
a verdict that could redraw the online map worldwide, the EU's top
antitrust sheriff Margrethe Vestager in June imposed a record penalty on
Google for illegally favoring its shopping service in search results.
The EU accuses Google of giving its multitude of services too much
priority in search results to the detriment of other price comparison
services.
The decision - if it survives an expected
appeal process - could prove to be momentous for Google, as well as for
competition law in general. The EU is also examining Google's AdSense
advertising service and its Android mobile phone software.
Finding a balance
Alphabet would
be wise to diversify, but it just must be careful not to take advantage
of its dominant position in online search to gain an advantage, noted
Silicon Valley analyst Rob Enderle of Enderle Group.
Investors
will also be watching to make sure this is a one-time fine, because not
even a behemoth like Google can take that kind of cash hit each
quarter, the analyst said.
"I don't see Google changing its behavior, which means the EU could continue to hit them with excessive fines," Enderle said.
"The EU does not have a sense of humor when it comes to US companies telling them to take a hike."
The
company announced separately that Google chief executive Sundar Pichai
would join Alphabet's board of directors. Pichai is responsible for
Google's product development and technology strategy, as well as the
company's day-to-day operations.
