EU charges seen unlikely to hurt Google valuation

By Devika Krishna Kumar and Subrat Patnaik REUTERS - The European Union's charges against Google Inc for distorting Web search results to favour its own shopping service are unlikely to hurt the company's valuation, analysts said. The charges, which come after a five-year investigation, could lead to a fine of up to 10 percent of Google's annual sales, or about 6.2 billion euros ($6.6 billion). If Google were to stop the practices immediately, the impact on revenue trajectory over the next 12-18 months would be minimal, Bernstein analyst Carlos Kirjner said in a note. Wells Fargo analyst Peter Stabler said the release of a formal objection was not surprising, given settlement talks had collapsed last year. He added that Google's current valuation reflected the regulatory risk. Wall Street has a bullish view on the search giant. More than three quarters of the analysts covering the stock have a "buy" or higher rating. None of the analysts tracked by Reuters changed their rating and price target on the stock after the charges. Apart from accusing Google of cheating consumers and competitors by skewing search results, the EU also launched another antitrust investigation into Google's Android mobile operating system. If the EU finds that Google has been abusing its dominant market position, it could have a far-reaching impact on other internet giants. "If the EU can find that Google's practices are anti-competitive or anti-consumer ... the regulators will catch up to more recent trends online, including the increasing dominance of Amazon, Facebook and Apple," Robert W. Baird & Co analyst Colin Sebastian said. Google's shares fell as much as 1.4 percent on Wednesday, while Facebook Inc and Amazon.com Inc were down about 1 percent. "Without any structural changes forced on the underlying framework of Google Search, we see little long-term risk to the business model from regulators," Sebastian said. However, some analysts expressed concerns. "We view the EU filing of formal antitrust charges as a negative, with both fundamentals and valuation implications," RBC Capital Markets analyst Mark Mahaney wrote in a client note. The European Commission penalized Intel Corp , the world's No.1 chipmaker, a record 1.09 billion euros in 2009 for hindering rival Advanced Micro Devices Inc . Microsoft Corp has been hit with total fines of more than 2.2 billion euros ($2.34 billion) over the past decade. ($1 = 0.9443 euros) (Editing by Saumyadeb Chakrabarty)