Why Google Inc (GOOG)(GOOGL) Shareholders May Not Like Alphabet Inc?


While some might have liked Google Inc (NASDAQ:GOOG) (NASDAQ:GOOGL) announcing a holding company, Alphabet Inc., there are others on the opposite side. If there is something to cheer about, then there are some concerns to worry about with the latest move. There is no doubt that the company has risen to a great level. However, it is a reality that the search engine is facing a threat since users started using apps than depend on searches. Therefore, there is a natural concern as to how far Alphabet will benefit shareholders or the company itself.

Search And Ad Business

As far as Google Inc (NASDAQ:GOOGL) is concerned, search and advertising were the strongest business right from the beginning. However, the company has been reducing its focus on the search after it reached an unbeatable position with a market share of over 60%. Also, the company has been diverting its attention to other projects, probably due to lack of opportunities for reinvestment within the core business.

There is a growing concern that the search engine giant has been shifting its capital to uncertain business futures or worse businesses from a strong, profitable one. There are enough reasons to support such concerns. Shareholders and the public are very well aware that the company has been investing in several areas of businesses. However, there is a real concern as to how many of them are successful. There is no guarantee that all its investments will be fruitful. That is why shareholders view some of their project with uncertain futures.

Good Efforts For Society

There is no doubt that some of Google Inc (NASDAQ:GOOGL)’s efforts are laudable from society’s perspective, like the maps. However, such efforts do not have to be good for the shareholders as investors expect their money to be invested properly to realize better returns.

There is a strong feeling in some sections of investors as to the possibility of the search engine’s new businesses transforming into a business like search or advertising. Shareholders appeared to believe that there is a slim chance of such undisclosed projects turning into a big profitable one. That is because, even after years of existence, YouTube is said to be incurring losses. Therefore, such diversification efforts are not making it better.

R&D In Clean Energy

Google Inc (NASDAQ:GOOGL)’s current projects are self-driving cars, clean energy, drones, Internet balloons, and other hidden endeavors. The concept of self-driving cars has been going on for years, and shareholders are yet to get a glimpse of how it will benefit them on a monetary basis. There is still anxiety as to what direction Alphabet will undertake. Shareholders expect clarity on that since they will be holding the shares of Alphabet, Inc. only.

Ideally, shareholders would like Larry Page and Sergie Brin to use the free cash flow to offer special dividends, as well as repurchase shares. They could very well use their own personal funds for venture investments that have limited probability.

Viraj Shah

Viraj Shah has completed M.Com (Finance) and is currently pursuing his CFP. He tracks US markets along with other global markets like India very closely. He is very passionate about stocks, real estate, and technology. He also believes that money can always be made in the market.

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