Alphabet Inc.'s (GOOGL) Google grabbed headlines on Tuesday when the European Commission announced a massive $2.7 billion fine against the internet giant for favoring its own shopping services over those of rivals.
The $2.7 billion penalty is now the largest anti-competitive penalty ever issued by the European Union's foremost antitrust regulator, topping the $1.2 billion penalty given to Intel Corp. (INTC) in 2009. Google now has 90 days to change the design of Google Shopping in Europe to meet the Commission's legal requirements. The company has 60 days to inform the Commission of its plans.
Wall Street analysts maintained that the charge will amount to just a drop in the bucket for the Silicon Valley behemoth, however.
"While this result is headline negative and could force changes to the display and ranking of shopping search results...it's important to note this fine still only equates to $3.85 per GOOGL share," said Cantor Fitzgerald analyst Kip Paulson in a note to clients on Wednesday.
Shares of Alphabet were slightly lower by 0.4% to $943.32 on Wednesday morning after falling 2.4% on Tuesday when the fine was announced. Other mega-cap tech stocks also declined on Tuesday, though, as part of a broader selloff in tech.
Alphabet has giant cash reserves that will be able to absorb much of the cost, said Monness Crespi Hardt analyst James Cakmak. The company has at least $90 billion in cash and generates more than $25 billion in free cash flow annually, he said. In all, the fine represents just about 3% of Alphabet's cash and marketable securities, as well as less than 1% of its market cap, said Stifel analyst Scott Devitt.
Google said in an SEC filing that it expects to accrue the fine in its fiscal second quarter.
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