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After EU Fines Google Over Android, Alphabet Will Take $5.07 Billion Charge in Q2

Alphabet, Google’s parent company, said it will take a charge of $5.07 billion against second-quarter 2018 earnings to account for the record €4.34 billion fine by the European Commission, alleging the internet giant violated EU anti-competition laws.

The company made the disclosure in a regulatory filing. The development hasn’t led investors to panic: Alphabet stock closed down 0.5% Wednesday, after edging into positive territory earlier in the session.

The European Commission announced the fine on Wednesday, and after finding that certain contractual provisions in agreements between Google and Android partners violated European law, including requiring manufacturers to pre-install the Google Search app and Chrome browser app as a condition for licensing Google’s Play Store app.

Google said it will appeal the decision — and CEO Sundar Pichai said that the EU decision threatens to disrupt Android’s free distribution model and ecosystem, which he said boosts consumer choice. “The Commission’s Android decision ignores the new breadth of choice and clear evidence about how people use their phones today,” Pichai wrote.

Alphabet is scheduled to report Q2 earnings next Monday (July 23) after market close.

Alphabet said it will report a separate operating expense line for the $5.07 billion charge (based on the exchange rate on June 30, 2018) on it Q2 2018 income statement. Because the fine is not tax-deductible, the charge will reduce Alphabet’s net income and earnings per share by the full amount.

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