Big Tech To Be Broken Apart?

Big Tech To Be Broken Apart?

over 3 years ago2 mins

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Be afraid, Big Tech, be very afraid: the US government has come to the end of its 16-month investigation and concluded they’re simply way too Big 😱

What does this mean?

The US government said Apple, Amazon, Facebook, and Google all enjoy “monopolistic powers” over products and services, which don’t leave customers with enough alternatives. And that, it reckons, needs to be reined in.

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One of its proposals – which are still a long way off becoming law – is to force Big Tech to split their business segments into legally separate companies. Splitting YouTube from Google, for example, would limit the latter’s influence on the advertising market 💻 Another idea is to require them to prove that any proposed mergers and acquisitions won’t unfairly increase their dominance (it’s currently regulators’ responsibility to prove they will). Lawmakers also said they’d like to see tech platforms make it easier for users to access rival services – just like Google and Microsoft have to do in Europe.

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Why should I care?

Sprawling companies with lots of different businesses are often undervalued by investors, who apply a “conglomerate discount” to their valuation assessments because there are so many moving parts 🏢 That kind of deliberate lowballing historically affected large industrial companies, but it now hits tech companies with empires covering everything from shopping and search to cloud computing and drones. Still, investors might actually benefit if they are broken up: some analysts think, say, Facebook and Instagram would be worth more as separate companies anyway.

The government doesn’t currently have the backing it needs to make any of its proposals a reality. But investors hate the whiff of uncertainty, and might soon jump ship to China instead 🇨🇳 Its tech stocks, after all, are facing less regulatory risk and – at a price-to-earnings ratio of around 30 versus US tech’s almost 35 – they look cheaper too.

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