Legal Issues Could Haunt Google Stock
Maxwell is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
As with any industry, the technology and software industry is dominated by a small number of large scale, multi-billion dollar companies that seem capable of adapting with the changing times, conducting inventive and effective marketing campaigns, and generally remaining solidly in the public consciousness. In the technology, software and web industry, one of these dominant companies is Google (NASDAQ: GOOG). Google is the big name that everyone knows, with its iconic logo and go-to search engine. And, recently, as Google has branched out with its Android operating system for smartphones and its own social networking experience, Google+, its reach seems to be constantly expanding. So how is this company's leading presence within the industry reflected in the price of its stock?
Currently, Google's stock is trading at around $569, $100 less than the share's peak, making it desirable to own. This figure is enough to make anyone stop and listen, but it becomes even more impressive if we consider the meteoric rise of stocks in the past 9 months. These changes are obviously huge, and there's no escaping the fact that Google is, just like every other company, vulnerable. So, what is it doing to see such negative recent figures?
One of the major contributing factors to Google's unstable stock price so far in 2012 is the Google vs. Oracle (NASDAQ: ORCL) lawsuit, which was recently concluded. Oracle's team accused Google of stealing the concept for a piece of technology which is now fundamental in the 300 million smartphones using Google's Android operating system worldwide: Java. Oracle's lawyers are currently pursuing an appeal after Google was found to be completely innocent of the infringement claims put forward, and even though the internet giant was found to have copied small portions of Oracle's IP, zero damages will be paid overall.
Google has also been the subject of legal debate recently because of its Google Street View application. The Federal Communications Commission recently attempted to investigate the methods Google used to gather information for this application, and accused Google of hampering the investigation and failing to cooperate. It is claimed that Google may have been sensitive about the investigation because, while collecting data for Google Street View, it also collected information such as internet histories and passwords from Wi-Fi networks - information which Google did not need for Street View, and information which it did not state it was collecting. As a result, Google has been fined $25,000 by the FCC, but the damage done to Google will go much further than a fine. Once again, this story will cause public confidence in the company to decrease, and consumers may even feel violated or personally wronged by Google once they become aware of its illicit activity. Meanwhile, in the UK, the Information Commissioner's Office has reopened the case into how Google generated data during the project, and how the company presented evidence to the ICO. It appears the regulator believes that the information had been manipulated to make the activity look less scrupulous than it actually was.
However, Google also made the press for some positive reasons in 2012. Recent reports suggest that Google is about to unveil a new online storage platform which will compete with the popular online storage service, Dropbox. It is thought that the Google platform, named Google Drive, will allow users up to 5GB of free storage, and will also allow users of tablet computers and smartphones to access and edit any documents they choose to store within the platform. Rumors also suggest that those who need more than 5GB of storage may be able to pay extra for additional space, meaning that Google Drive will accommodate all types of internet users. Amidst all the negative publicity, it's good to see that Google is still concerned with developing the internet for consumer use, especially as Microsoft and Apple have this area sewn up right now. There's considerable concern for Dropbox too, not least because their pricing points leave them extremely uncompetitive.
Additionally, Google is broadening its range of services, as it has recently made deals with film and media companies Paramount and MGM. These deals mean that Google consumers can pay to rent a wide range of films via the Google application store, Google Play. The films will also be available through YouTube. This is an interesting move, and apparently an attempt to compete with services such as those from Netflix. Currently, this service is only available in the USA and Canada, but Google could take this overseas if it is successful.
While Google is taking a number of positive steps in order to broaden its scope of services and keep up with customer demand, its current legal battles and seeming misconduct are preventing these positive developments from receiving the limelight they deserve. Unless Google undertakes some serious damage control in terms of the effects of the Google Street View case and the potential effects of the Google vs. Oracle case, it could lose a large number of clients, which could have a devastating effect on its share price.
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