Barclays Bank recently reported that the U.S. Department of Justice's antitrust lawsuit against Google (GOOG, GOOGL) is unlikely to significantly impact Microsoft (MSFT, Financial). Barclays has given Microsoft an "overweight" rating with a target price of $475.
According to Barclays analyst Raimo Lenschow, Bing constitutes only a small portion of Microsoft's total revenue, projected to be 5% in the 2024 fiscal year. Many software investors are not fully aware of the ongoing investigation, leading to a largely overlooked impact of any developments in the case. However, Lenschow suggests that Microsoft's investors should pay closer attention to the final judgment expected from the Department of Justice.
If the remedies include ending Google's revenue-sharing agreements with other companies or integrating its search services, Bing could capture a greater market share. This scenario might compel Google to share some of its technology with partners and offer search text ads to U.S. partners, retaining only 10% of total revenue. Google would also be limited to integrating 25% of search text ads, requiring partners like Apple to fill the gap using their technology or new partners like Bing.
Lenschow notes that while this situation could be favorable for Microsoft, the changes would be minimal in the short term, with any significant impact not expected until at least 2027.
