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MarketScreener Homepage  >  Equities  >  Nasdaq  >  Microsoft Corporation    MSFT

MICROSOFT CORPORATION

(MSFT)
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Delayed Quote. Delayed Nasdaq - 11/27 01:00:00 pm
215.23 USD   +0.64%
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Google's Antitrust Woes Seen Helping Microsoft's Bing

10/22/2020 | 11:10am EST

By Aaron Tilley

The target of the U.S. government's last major tech antitrust campaign could be the biggest beneficiary of its newest lawsuit.

Microsoft Corp.'s Bing search engine is the only major competitor to Google's dominant product, though it has less than 7% of the market. The Justice Department accused the Alphabet Inc. unit of using anticompetitive tactics to preserve a monopoly for its flagship search engine and related advertising business in an antitrust lawsuit it filed Tuesday.

The suit represents the biggest enforcement action against a major tech company since Microsoft and the U.S. government went to battle more than two decades ago. The Justice Department's latest charges echo those it leveled against the software maker in 1998.

After years of litigation, Microsoft avoided a threatened breakup. But the distraction from the case helped rivals capitalize, such as Google becoming the dominant search provider.

This time Microsoft could get the boost. "Anything that limits Google's ability to move freely in the market is a good thing for Microsoft," said Brad Reback, an analyst at Stifel Nicolaus.

A Microsoft spokesman declined to comment on Google's antitrust case.

The Justice Department alleges that Google uses billions of dollars it collects from advertisements on its platform to pay mobile-phone manufacturers, cellular carriers and browser suppliers, such as Apple Inc. and its Safari, to maintain Google as their preset, default search engine. These payments create a self-reinforcing cycle of dominance, the suit alleges.

Google calls the case deeply flawed and said its search engine is popular because people choose to use Google, not because they can't find alternatives.

A loss for Google in the antitrust case could mean court-ordered changes to how it operates some of its business, potentially creating openings for rivals. Microsoft would be the most natural company to gain.

Microsoft's Bing search engine is the second-largest competitor in the field -- though by a huge distance. Bing had a 6.7% market share in the U.S. in September, compared with Google's 88.1%, according to Statcounter, while Yahoo was at 3.29% and DuckDuckGo at 1.7%. Bing's market share has barely changed over the past decade.

Despite its laggard status, Bing is a sizable business. Microsoft reported $7.7 billion in search-ad sales in its last financial year, principally linked to Bing -- more revenue than its device sales and a bit behind its LinkedIn social media unit.

The Bing figure, though, was little changed from the prior year. And while the software company's computer gaming and cloud-storage businesses have benefited during the pandemic as people spend more time at home, its search business has been dented as advertisers pulling back on spending.

Under former Chief Executive Steve Ballmer, Microsoft and Google were fierce rivals in search. But that battle ended. Microsoft's current CEO, Satya Nadella, and Google's Sundar Pichai brokered a truce four years ago, withdrawing their regulatory complaints world-wide against one another.

Since then the companies have found areas of cooperation even as they compete in other markets such as cloud computing and business software. Microsoft last year relaunched its effort to design and sell its own line of smartphones, this time using Google's Android software instead of its own mobile operating system.

Former Google CEO Eric Schmidt said at The Wall Street Journal's Tech Live conference on Wednesday that the company he once ran had to contend with ruthless competition in search, particularly from Microsoft. Through Wednesday, Microsoft is America's second most-valuable company after Apple, with a market capitalization of $1.62 trillion, while Alphabet is fourth, at $1.08 trillion.

Under Mr. Nadella, Bing has taken less prominence within Microsoft to other ventures, notably its cloud-computing division and its videogaming business. But Microsoft hasn't given up on search. The company struck a deal last year for Bing's ad software to be used on the Yahoo search engine, owned by Verizon Communications Inc. Yahoo search itself also is powered by Bing.

Microsoft last year also announced an upgrade of Bing in conjunction with the company's launch of its Edge browser. The search features, the company said, were aimed in part at making people more productive by helping them find office locations, people and other corporate information.

Google's regulatory troubles have already benefited Microsoft to a limited extent. In Europe, Google since March has been showing people who set up new mobile devices running the company's Android operating system what it calls a "choice screen," a list of rival search engines that they can select as the device's default.

The system is part of Google's compliance with a 2018 European Union decision that found the company used Android's dominance to strong-arm phone makers into pre-installing its search engine.

Microsoft's Bing has benefited from auctions that are held to determine which search apps appear on the choice screen -- which offer three spots in each of 31 countries to outside search engines.

With another shot at search, Microsoft could try to differentiate Bing from Google by providing a more privacy-focused version of search, said former Google executive James Whittaker, who also worked on Bing under Mr. Ballmer.

"Google's weaknesses are privacy and users' hatred of ads," Mr. Whittaker said. "Those are the places Bing needs to focus on if it is going to make another run at being a real competitor."

The distractions of an antitrust case that is expected to take years also could serve to keep Google from further encroachment on Microsoft's core businesses: the cloud and corporate applications. "Antitrust cases are extraordinarily complex and consume tremendous amounts of senior management attention," Mr. Reback said.

Microsoft hasn't shied away from regulatory battles that some of its other rivals potentially face. Microsoft relies on app stores for some of its videogame business and is among several to complain about how Apple runs its app store, describing the practices as monopolistic and harmful to customers.

Microsoft also hasn't escaped the increased regulatory scrutiny facing tech giants. Workplace collaboration software provider Slack Technologies Inc. this year filed an antitrust lawsuit against Microsoft in the EU, accusing its rival of trying to kill competition. Microsoft said it was committed to providing customer choice.

To what extent Microsoft can revive its search ambitions is uncertain. "Even if you removed Google off every phone and device that shipped, most people would still go back to Google," Jefferies analyst Brent Thill said. "I think it's game, set, match in search."

Write to Aaron Tilley at aaron.tilley@wsj.com

(END) Dow Jones Newswires

10-22-20 1110ET

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Financials (USD)
Sales 2021 158 B - -
Net income 2021 51 344 M - -
Net cash 2021 76 102 M - -
P/E ratio 2021 31,9x
Yield 2021 1,01%
Capitalization 1 627 B 1 627 B -
EV / Sales 2021 9,81x
EV / Sales 2022 8,76x
Nbr of Employees 163 000
Free-Float 99,9%
Chart MICROSOFT CORPORATION
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Microsoft Corporation Technical Analysis Chart | MSFT | US5949181045 | MarketScreener
Technical analysis trends MICROSOFT CORPORATION
Short TermMid-TermLong Term
TrendsNeutralNeutralBullish
Income Statement Evolution
Consensus
Sell
Buy
Mean consensus BUY
Number of Analysts 39
Average target price 242,47 $
Last Close Price 215,23 $
Spread / Highest target 29,2%
Spread / Average Target 12,7%
Spread / Lowest Target -16,4%
EPS Revisions
Managers
NameTitle
Satya Nadella Chief Executive Officer & Non-Independent Director
Bradford L. Smith President & Chief Legal Officer
John Wendell Thompson Independent Chairman
Kirk Koenigsbauer COO & VP-Experiences & Devices Group
Amy E. Hood Chief Financial Officer & Executive Vice President
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