Google (GOOG) is easily one of the most powerful companies in tech right now but according to Sector & Sovereign Research analyst Paul Sagawa, a serious threat is beginning to present itself. According to the analyst, Google is “the greatest data processing company on Earth,” and its mastery of collecting and utilizing data powers the success of each big product it offers, including search, advertising and even Android. Sagawa sees trouble potentially looming on the horizon though, and it’s not coming from a rival like Apple (AAPL) or Microsoft (MSFT).
“The biggest risk for Google is government intervention,” Sagawa wrote in a note on Sector & Sovereign’s website titled Google: The Biggest Hammer in a World Full of Nails. ”We believe that these threats, in many jurisdictions, can be negotiated without significantly diluting Google’s bright future.”
Android is the king of smartphone operating systems, Google search is unrivaled, the company “essentially invented the cloud” and is very well positioned to capitalize on the coming cloud boom, its business is built to scale and its advertising business is booming even though ads are “Google’s monetization of choice, not necessity” according to the analyst. But Sagawa thinks Google’s widening lead in these categories may soon be slowed by government intervention.
“Google’s powerful IT infrastructure, Android market momentum, and portfolio of leading cloud assets, such as search, video streaming, and internet advertising, are a competitive bulwark for the company’s core revenues and a springboard to future growth and new opportunities,” Sagawa wrote. “However, inquiries at the FTC and by several European governments could lead to restrictions on Google’s ability to leverage these advantages or hamstring the effectiveness of its core search franchise. While we believe catastrophic outcomes are very unlikely, the potential for some level of regulatory burden is real.”
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