As Google faces off against the Department of Justice (DOJ) over antitrust concerns, the battle’s outcome could reshape the tech landscape and impact the company’s future.
Analysts at JMP Securities, Mizuho and Barclays have weighed in on the possible scenarios and their implications:
Analysts at JMP Securities anticipate that the DOJ may impose remedies such as requiring OEMs and browsers to present a choice screen for default search engines.
They explain that this would likely benefit Google, as its superior search quality could help it retain a significant market share despite increased competition.
"We would assume that OEMs and browsers are required to present a list of default choices," analysts at JMP Securities noted, suggesting that this approach would be the most likely outcome.
While this could hurt Google, the firm maintains its bullish stance, citing the company's strong position in AI and YouTube. However, analysts warn that if regulators bar Google from bidding on default search placements, it could dramatically alter market dynamics, benefiting competitors like Microsoft, but potentially harming Apple and other partners dependent on Google's revenue-sharing agreements.
Analysts at Mizuho, on the other hand, view a breakup of Google as improbable due to the high legal threshold established by historical precedents like AT&T's 1982 breakup.
"The hurdle for a break-up is quite high," analysts at Mizuho stated, emphasizing that Google's dominance in search does not equate to the vertical control seen in AT&T's case.
Instead, analysts expect a remedy similar to past cases, such as a Choice Screen for search engines, which could preserve Google’s market position.
Analysts at Barclays outline a spectrum of possible impacts, from minimal to significant. They warn that remedies could reduce Alphabet’s (NASDAQ:GOOGL) gross profit by up to 41%, depending on the extent of structural or behavioral changes.
Analysts suggest that the most detrimental outcomes might involve divestitures of major assets like Chrome or Android, or severe restrictions on search and ad revenue models.
While the exact resolution remains uncertain, the investment banks highlight that the DOJ’s actions could lead to significant adjustments, with potential long-term effects on its profitability and market strategy.