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 $3.2billion in profit in its latest quarter. When excluding the fine, earnings came to $11.75 U.S. per share, which topped the average estimate of $9.45 U.S. per share by analysts surveyed by Zacks Investment Research. In the past, Google earned as much as 97 percent of its revenues from ads, but that number has been falling. The EU Competition Commission found that Google violated antitrust regulations by requiring that phone manufacturers install certain Google apps on Android phones (like Search and Chrome), pay these manufacturers to limit the installation of Search apps on their phones to Google Search, and ban the release of handsets using unapproved versions of Android. "One of the unintentional consequences of GDPR is the strengthening of the duopoly", said Gil Elbaz, a former Google executive who now runs the marketing firm Factual. Analysts were expecting US$25.55 billion, according to data compiled by Bloomberg. The company's stock took a slight hit after news of the fine broke last week, but it was trading at $1,211 per share at market close, up 7 percent over the past month.
Google must now bring this conduct to an end within 90 days or face penalty payments of up to 5 percent of the average daily worldwide turnover of Alphabet, the EC said.
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Alphabet reported $3.2 billion in profit, compared with the analyst estimate of $6.72 billion. Chief Financial Officer Ruth Porat suggested that the company would not sacrifice investment in its cash cow of advertising in favour of other bets like autonomous cars and delivery drones. "We are analyzing the decision and I think it's too early to comment or speculate", he said.
'Our investments are driving great experiences for users, strong results for advertisers and new business opportunities for Google and Alphabet'. Other revenue, which includes its cloud business and hardware, was $4.4 billion. The "Other Bets" segment of various startup and moonshot endeavors had higher revenue this quarter, $145 million, but grew its operating loss to $732 million at the same time. Porat highlighted spending on sales and marketing for Google's cloud division, which is hosting its marquee conference later this week.