EU antitrust ruling against Google seen as win for Amazon, Apple

The EU has hit Alphabet-owned Google (GOOG; GOOGL) with a record antitrust fine for abusing the dominance of its Android mobile operating system. Commenting on the decision, Baird analyst Colin Sebastian said he believes it to be a "pro-Amazon" (AMZN) ruling, benefiting the e-commerce giant and potentially Apple (AAPL) as well. ANTITRUST FINE: The European Commission has fined Google EUR4.34B for breaching EU antitrust rules. "Since 2011, Google has imposed illegal restrictions on Android device manufacturers and mobile network operators to cement its dominant position in general internet search. Google must now bring the conduct effectively to an end within 90 days or face penalty payments of up to 5% of the average daily worldwide turnover of Alphabet, Google's parent company," the Commission stated. Google CEO Sundar Pichai, in response to the European Commission competition decision, stated that "rapid innovation, wide choice, and falling prices are classic hallmarks of robust competition and Android has enabled all of them. Today's decision rejects the business model that supports Android, which has created more choice for everyone, not less. We intend to appeal." 'PRO-AMAZON' RULING: In a research note to investors, Baird's Sebastian argued that the European Commission's ruling against Google is "a bit misguided," but likely a "relatively minor inconvenience" in the short and medium terms. Longer-term, the analyst said he sees modest but not unexpected added risk from requirements to support forked versions of Android, and from the direct and/or indirect benefits of this ruling for Apple and Amazon. In practical terms, the EC is saying that Android users need to download the Google apps they want rather than have them pre-installed and implicitly instructs Google to make its apps available on forked-version of Android, even if those apps won't work as well or as intended on modified operating systems, he contended. Sebastian believes this ruling should have a limited direct impact on Google since it ostensibly does not force a change to the Google search algorithm and seems relatively straight-forward for Google to comply. However, the bigger issue may be the obvious benefits to Amazon and potentially Apple, he argued. The analyst pointed out that while Amazon already generates about 50% of commerce and product-related searches, the EC will require Android users to take another step before they can access an alternative product search engine. Additionally, to force Google to support distribution of forked-versions of Android could directly benefit Amazon's Fire devices, he highlighted. Nonetheless, the analyst noted that the decision does not change his positive view on Alphabet and reiterated an Outperform rating and $1,300 price target on shares of Google's parent company. PRICE ACTION: In morning trading, Class A shares of Alphabet and Amazon are each fractionally lower. Meanwhile, Apple's stock has dropped almost 1% to $190.12.