Lawmakers in Washington, D.C. have been accusing some of the world’s biggest technology companies of operating like monopolies and threatening to break them up. And that, in turn, has affected tech stocks.
A recent report commissioned by the House Judiciary Committee recommended breaking up several large tech companies, preventing them from purchasing smaller start-ups and overhauling America’s antitrust laws. While some critics have dismissed the threats made on Capital Hill as political posturing and the wrong approach, the idea of breaking up tech companies got us thinking about which of today’s multi-billion dollar technology behemoths might be worth more in pieces.
With that in mind, let’s look at four such technology companies and consider what breaking them up might look like. They are:
Now, let’s dive in and take a closer look at each one.
Hot Tech Stocks: Alphabet (GOOGL, GOOG)
Few technology companies today are as diversified as Google. From Google Maps and YouTube to Pixel smartphones and self-driving cars, Alphabet is a well-diversified multinational.
The company also has a dominant position in online search with its Google engine and is an advertising dollar machine, racking up nearly $135 billion in ad revenue during 2019. Alphabet recently threatened to pull its search engine from Australia after the government there threatened to make Google pay for the news content that it siphons off news sites.
One could imagine how valuable Alphabet would be if it were broken apart and its various divisions spun off into standalone companies. The Waymo self-driving car subsidiary alone has been reported to be worth more than $100 billion. Dismantling Alphabet could prove to be very lucrative indeed with a number of self-sufficient divisions and subsidiaries ready to run on their own.
Overall, GOOGL stock has been trending higher in recent months — rising 34% since late September to its current price of $1,893.
Another diversified, mature and dominant technology company is Microsoft. The Seattle, Washington-based company founded by Bill Gates does a lot more today than produce the Windows operating system for personal computers.
Microsoft is now a market leader in everything from video games (the Xbox console) to video conferencing (Teams), and is also a player in sectors as diverse as cloud computing and artificial intelligence. It still makes PC operating systems and still has its Bing search engine. But Microsoft today is technology company whose reach extends far and wide.
There’s no question that Microsoft would be worth substantially more in pieces. But the company has been down this road before. Twenty years ago, Microsoft was the subject of a bitter antitrust law suit initiated by the U.S. federal government, which accused the company of holding a monopoly position in the personal computer space and of using anti-competitive practices to stifle competition. The case was settled when Microsoft agreed to, essentially, be more cooperative with third-party companies.
Today, MSFT shares trade at just under $240 per share and enjoyed a recent bounce after the company reported yet another blockbuster quarter.
Hot Tech Stocks: IBM (IBM)
What to do with Big Blue? Many investors and analysts have been calling for the break-up of International Business Machines (IBM) for years, claiming that the company in its current form is an outdated legacy business.
The executive leadership of IBM seems to have heard the criticisms and announced last October that it is partially breaking itself up in order to concentrate on its cloud computing services. Specifically, IBM said it will spin-off its information technology infrastructure services unit as a separate company with a new name by the end of this year (2021).
The spin-off will enable IBM to focus almost exclusively on more profitable and cutting edge cloud computing and artificial intelligence products. The company recently completed its $34 billion acquisition of cloud computing company Red Hat and remains a leader in artificial intelligence through its “Watson” division.
While investors cheered the news that IBM is effectively breaking itself up, the company — which turns 110 years old this year — could be broken down further and sold off in pieces. The idea has certainly been suggested, especially with IBM stock seemingly stuck at its current level of $120 per share.
Apple’s recent financial results showed that the company is firing on all cylinders, reporting that it achieved more than $100 billion in quarterly revenues for the first time. Apple has a lot of cylinders in its engine. From 5G-enabled iPhones and AirPods to Mac computers and Apple Music to its new streaming service and Apple Pay mobile payment and digital wallet service. Apple today is diversified, global and hugely profitable. The company currently has nearly $200 billion of cash on hand.
Collectively, breaking up Apple could be extremely lucrative. And while the company today might be too big to break-up, it’s a tantalizing idea to ponder. The idea is concerning enough to Apple CEO Tim Cook that he’s been making the media rounds in recent months talking about how his company has plenty of competition in key business segment such as smartphones and doing his best to distinguish Apple from other tech giants such as Google and Facebook (NASDAQ:FB).
Apple’s share price has been up and down since the company split its stock last August, and it currently sits near $135 per share. However, some analysts forecast a breakout is coming.
On the date of publication, Joel Baglole held long positions in APPL, MSFT and FB.
Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.