Today: Google (GOOG) reportedly receives an ultimatum from the United States on a possible antitrust lawsuit as British politicians grill an executive on taxation. Also: Facebook falls, then rises ahead of another lockup expiration, Wall Street has steady day.
Google pressured by Federal Trade Commission and British lawmakers
Google faced pressure in the United States and United Kingdom on Monday, as the Mountain View search giant reportedly received a deadline to answer U.S. Federal Trade Commission concerns about antitrust activities and sent an executive to answer for its tax practices in Europe.
The U.S. inquiry is far more serious and has been boiling much longer, with the FTC spending at least the last year and a half investigating Google's practices for proof that it is using a dominating position in the search market to promote its own products, along with other complaints. Bloomberg News reported Monday that FTC Chairman Jonathan Leibowitz has told Google to find a resolution in the next few days or face a lawsuit.
If Google is able to negotiate a settlement with the FTC, it would avoid a highly costly and complicated trial with no guaranteed outcome, as the company could be forced to
A settlement would not be satisfying for the companies that have complained about Google's practices, however, according to Gary Reback, a Silicon Valley antitrust attorney advising several such companies.
"We don't like the whole notion of secret negotiations and then a settlement, because that produces worthless results," Reback told the Mercury News last week.
While a settlement could be a better resolution for Google, onlookers expect the company to battle the charges that its core business is trampling other companies.
"(Search) is their heart and soul," said Harry First, a New York University law professor and antitrust expert, "so it would not surprise me if they fight these allegations very vigorously."
In Great Britain, Google joined Amazon and Starbucks to answer questions from lawmakers about how much tax the companies pay. The other two American companies faced more withering commentary from the Public Accounts Committee, as Google admitted basing operations in Bermuda for favorable tax rates, but reminded the lawmakers that the maneuver was legal.
"We comply with the law in the U.K.," Matt Brittin, chief executive of Google UK, told the Parliamentary committee. "It would be very hard for us to pay more tax here based on the way we are required to structure by the system."
The politicians were not enthused by Brittin's testimony -- the head of the committee, Margaret Hodge, said, "We are accusing you of being immoral," not illegal -- but Google came out of the hearing smelling far better than the two other companies.
Starbucks claimed that it had produced profits in Britain only once, in 2006, and Amazon refused to answer many questions about its business. Lawmakers scoffed at Starbucks' claim of poverty and savaged Andrew Cecil, the public policy director at Amazon, for his lack of transparency.
"It's just not acceptable. ... It's outrageous," Hodge said of Cecil's testimony, which included the executive saying Amazon had never disclosed UK sales publicly, despite the figure appearing in its most recent regulatory filing, according to Reuters.
Google's stock price wasn't negatively affected from all the negative attention, as shares increased 0.4 percent on the day to $665.90 as the company's YouTube unit continues to push original programming with further investment and more Chromebooks appear.
Facebook falls, then rebounds, as largest lockup expiration yet looms
Facebook managed a stronger rise Monday on Wall Street, despite the pending expiration of the company's largest single lockup yet.
Facebook stock descended Monday morning, dropping below $19 -- half of the $38 shares commanded in the Menlo Park company's record-breaking IPO in May -- as investors fretted about nearly 800 million shares coming available for trades Wednesday. Investors pushed the price back up by a bundle, however, possibly looking for a bargain, and the stock closed with a 4.5 percent gain at $20.07.
There are still concerns about the effects of the lockup's expiration, however, as Facebook hit a record low after the first round of post-IPO shares became available to trade, and dropped another 3.8 percent after its most recent lockup ended. Those two expirations released a combined 511 million shares, while 777 million shares will be released after Tuesday.
But the release of shares is not as important as if those who hold them actually sell, experts said, and Facebook's most recent quarterly report elevated the company's standing in investors' eyes.
"Buckling of the stock would occur because of lots of selling at the same time," Pivotal Research Group analyst Brian Wieser told Bloomberg. "It seems like there's enough demand to absorb this. Investors would have been a lot more nervous if third quarter numbers hadn't come out well."
Gilead hits all-time high, Hewlett-Packard again hits decade-low
Wall Street was relatively quiet Monday after the turbulence of postelection trading the week before, with all three major U.S. stock indexes moving less than 0.05 percent. Silicon Valley tech stocks managed a modest rise, however as the SV150 index moved up 0.15 percent.
A big driver for the SV150 on Monday was Foster City biopharmaceutical giant Gilead, which hit its highest stock price in 20 years as a public company after announcing Saturday that a combination of drugs showed a 100 percent cure rate for hepatitis C in a recent trial. The combination of drugs includes one Gilead acquired in a January deal that cost almost $11 billion, from which investors were antsy to see a positive result.
"(The acquisition) is starting to look like a home run as we now know Gilead at least has a 100 percent cure all-oral regimen with its own wholly owned drug with no partnering," RBC Capital Markets analyst Michael Yee wrote of the finding.
Gilead hit an all-time high of $74.34 in Monday's session and closed with a 13.7 percent gain at $73.93.
On the other side, Hewlett-Packard (HPQ) again fell to a decade-low price, declining as low as $13.31 before closing at $13.41, a 1.5 percent daily decline. Personal computer companies continued to face investor pressure, as Microsoft declined 2.1 percent as CEO Steve Ballmer said its Surface tablet had a "modest" start, and Intel (INTC) dropped 0.2 percent.
On Tuesday, all eyes will be on Cisco (CSCO), which will announce earnings typically seen as a tech bellwether due to the San Jose networking company's place at the top of its industry, with demand for networking equipment seen as a good sign for other companies in the computing industry.
Silicon Valley tech stocks
The tech-heavy Nasdaq composite index: Down 0.61, or 0.02 percent, to 2,904.26
The blue chip Dow Jones industrial average: Down 0.31 to 12,815.08
And the widely watched Standard & Poor's 500 index: Up 0.18, or 0.01 percent, to 1,380.03
Check in weekday afternoons for the 60-Second Business Break, a summary of news from Mercury News staff writers, The Associated Press, Bloomberg News and other wire services. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/mercbizbreak.