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With the growth of tech giants such as Google and Amazon sluggish, can a break-up maximize value?

via:新浪科技     time:2023/2/14 8:00:34     readed:110

According to news from Sina Technology News on the evening of February 13, Beijing time, it is reported that as large technology companies are facing sluggish growth, and adverse economic prospects may prevent them from regaining market dominance, strengthening antitrust censorship seems to be the last thing they need. But some investors disagree.

At present, although it is unlikely to break up these large technology companies, it is not an empty problem. Antitrust review of them has become a common goal of both parties in the United States. Last week, US President Joe Biden called for legislation to crack down on big technology companies. It also means that the word "antitrust" has appeared in the president's State of the Union address for the first time since 1979.

Breaking up big technology companies could unleash the value of companies such as Amazon or Alphabet, both of which have strong businesses but whose potential is overshadowed by their huge corporate structures. Supporters believe that if it is split into separate businesses, the stock value of the new company may add up to a higher value than the current parent company.

Eric Clark, portfolio manager at Accuvest Global Advisors, the investment firm, said: "Amazon and Alphabet have been underperforming and breaking up the business will bring the greatest release of value."

Mr Clark expects Amazon shares to rise 50 per cent if split, while Alphabet shares could rise as much as 30 per cent. Since the beginning of last year, both stocks have underperformed the Nasdaq 100 index. Alphabet shares have plummeted in recent days on fears that Microsoft's artificial intelligence measures could weaken Google's dominant position in search.

It was reported earlier this month that the Federal Trade Commission (FTC) was preparing to file an antitrust lawsuit against Amazon. Last month, the Justice Department joined eight states in suing Google for a break-up of its advertising technology business.

Clark said: "I welcome more action from regulators on antitrust, as it could get these companies out of backwardness and provide a range of better options for investors." I would rather choose individual new businesses after the spin-off. "

Analyst Laura Martin believes that the Alphabet split will be more valuable than it is now, so she welcomes the regulatory break-up of Google. Mr Martin estimates that a break-up of Alphabet could boost the share price by 10 to 20 per cent. If YouTube were to trade alone, its market capitalization would be $300 billion, almost twice that of Netflix.

Amazon has three businesses, namely, e-commerce, Amazon AWS cloud services and advertising services. The scale of each business dwarfs most other companies. AWS, for example, generated $80 billion in revenue last year, equivalent to P & G's total sales.

Bloomberg Intelligence estimates that AWS could be worth between $1.5 trillion and $2, 000bn, while others estimate as much as $3, 000bn. By contrast, Amazon's overall market capitalization is only about $1 trillion.

In addition, even if these companies are undervalued, the prospect of protracted litigation or anti-technology legislation may be a drag on sentiment towards these stocks. Moreover, antitrust action could also hit the core profit sources or growth areas of these companies.

Currently, British antitrust regulators are investigating Apple's position in the mobile ecosystem. At the same time, lawyers from the US Department of Justice are also drafting an antitrust lawsuit against Apple. Analysts believe that there is a real risk of litigation in the Apple App Store.

In addition, multinational regulators questioned Microsoft's acquisition of Activision Blizzard on competition grounds. 'This is a tough question for these companies, 'says Denny Fish, a senior executive at asset managers.

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