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Alphabet Inc (GOOGL) Needs to Quit Picking Fights and Focus!

Recent spats between competitors and questionable acquisitions makes GOOGL stock less appealing

It’s hard to knock Alphabet Inc (NASDAQ:GOOGNASDAQ:GOOGL) stock when it’s up 18% year-to-date through Sept. 26 and trading within 6% of an all-time high, but that’s exactly what I’m going to do.

Two fights and one questionable acquisition have me scratching my head, wondering what exactly is going on at GOOG headquarters.

Fight # 1

Waymo, Alphabet’s self-driving company, first launched its suit against Uber back in February, accusing the ride-sharing business of misappropriating some of Waymo’s trade secrets.

Waymo’s complaint alleges that former Waymo manager Anthony Levandowski downloaded more than 14,000 confidential files before leaving the company to set up his own company, Otto, in early 2016. Otto was subsequently acquired by Uber in August of last year for $680 million in Uber stock along with the rights to 20% of future profits in trucking.

Levandowski was fired by Uber in May after ten months at the company for refusing to answer questions about Waymo’s allegations in an internal company investigation.

Now, with September almost complete, the trial between Waymo and Uber is scheduled to start Oct. 10, although Waymo’s asked for an extension to go through new evidence.

At stake in this trial is $1.9 billion in damages that Waymo’s seeking for a total of nine trade secrets it alleges were taken by Levandowski on the way out Google’s door.

I understand Waymo and Google trying to protect the integrity of its self-driving business, but much like major acquisitions, lawsuits take executives away from the task at hand and that always should be a concern for investors.

Let’s hope a couple of billion dollars is worth it.

Fight # 2

For this second dust-up, I turn to my InvestorPlace colleague Brad Moon, who recently wrote about Google’s fight with Amazon.com, Inc (NASDAQ:AMZN).

Apparently, Google’s pulled YouTube access from Amazon’s Echo Show smart speaker, Moon suggests, for a number of reasons.

First, it’s doing so to get Amazon to implement YouTube features, such as subscriptions and autoplay, not currently supported. Second, it’s possible Alphabet wants Amazon to switch search engines for the speakers from Bing to Google. A third possibility is that Google wants Amazon to carry its products.

That’s a lot of demands from a competitor, but, as Brad points out, it could end up getting settled like the Apple TV spat with Amazon, which just came to an amicable conclusion after two years.

Does Google need to be picking a fight with Amazon — one that could end up alienating YouTube users? I don’t think so, but then I’m not Alphabet CEO Larry Page.

Questionable Acquisition

Alphabet is hellbent on being a smartphone success.

First, after blowing almost $10 billion on Motorola Mobility, which amounted to a big, fat nothing, Google’s now paying $1.1 billion to acquire 2,000 HTC employees, including key smartphone engineers to deliver a better Pixel phone while also controlling its destiny when it comes to hardware.

Granted, these 2,000 employees were already working on Pixel, so only the name on their paycheck has changed, but I have to wonder why GOOGL is doubling down on its smartphone bet at a time when it’s not clear there’s a need or demand for its products.

“The hardware market is still largely dependent on scale,” stated Xiaohan Tay, a smartphone analyst with research firm IDC. “The Pixel is priced at a very premium price, and it’s competing with Apple and Samsung.”

To me this appears to be another case of the company barking up the wrong tree and, in the process, wasting a lot of time that could be spent commercializing products people actually need.

Bottom Line on GOOGL

In August, I called GOOGL stock a buy, but questioned its founder-centric model of capitalism led by Larry Page. These two spats and the acquisition give me further pause about owning GOOGL stock.

Alphabet’s still a buy in my books, but it’s getting pretty tenuous.

It’s time to focus, Google!

As of this writing, Will Ashworth did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2017/09/alphabet-inc-googl-quit-picking-fights-focus/.

©2019 InvestorPlace Media, LLC