By far the largest division of Alphabet Inc. (NASDAQ: GOOGL | GOOGL Price Prediction), Google, has lost two legal actions claiming it has a monopoly in the online ad industry. Two other huge tech companies have faced a similar hurdle. AT&T was broken up in 1983. Microsoft almost suffered the same fate in 2001 but was able to hold off the U.S. government. In other cases, like General Electric, management and the board have decided to break up independently without government encouragement. GE did so in early 2024, when the 132-year-old company divided into three publicly held companies. Those who held all three stocks did remarkably well. Alphabet shareholders may do well in a breakup too.
Google’s Many Parts
Chrome, Android, AI, and more.
The government argues that Google’s search ad business has been a monopoly. It might be one segment that Alphabet could spin out. Alphabet had $96.5 billion in the fourth quarter, of which $54 billion was Google search. Alphabet has several divisions that bring in almost no money. These include the autonomous driving business Waymo and the home automation business Next.
Alphabet has four other very valuable businesses. One is Chrome, which is Google’s browser. Its share of the global browser market is about 65%. Among the values it provides Alphabet is that people who download Chrome automatically can access Google’s Web store. Chrome also integrates Google search and other products, including Gmail. Chrome helps build and maintain Alphabet’s success in these businesses.
Alphabet also owns Android, an operating system used on computers and smartphones. It has a market share of 71% worldwide, while Apple’s iOS has almost all of the remainder. Android also integrates Google products and search.
Some investors believe that Alphabet’s most important business is Google Cloud, one of the largest cloud businesses in the world, along with Microsoft Azure and Amazon’s AWS. The global cloud industry has had explosive growth for almost a decade.
Finally, Google has an AI business that relies on Google search for some of its distribution. Alphabet thinks this business is important enough to invest $75 billion, most of which will go to AI server farms. The AI industry has become the hottest tech sector, and major companies in the space including Amazon, Microsoft, Meta, and OpenAI have committed tens of billions of dollars to its growth.
The Breakup
How to break up Alphabet.
How does Google get broken up? The search business could be a standalone product. The AI and cloud businesses could be bundled together. Could a browser business be married to the Android OS?
If AI and cloud computing have the future that many people believe they do, just those parts of Alphabet could have a huge valuation as a new public company.
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