S&P Downgrades Google, Sees Risk From Motorola Buy
Standard & Poor's downgraded Google to sell from buy with a $500 price target Tuesday, because of the web company'splanned $12.5 billion purchase of Motorola Mobility.
Analyst Scott Kessler told CNBC he sees greater risk to Google and its stock because of the planned acquisition.
"Google is paying a premium price" for Motorola Mobility , he said. "They're buying this company to protect its Android franchise from patent threats, but we don't think there’s any guaranty that such a transaction will be able to help in that regard."
He is also concerned the combination of the two companies will take longer than Google expects, "degrading significantly Google’s growth and its margins."
Google "is in a variety of different areas and has competitors in almost all of them," he added. The company has "gotten a lot of great publicity with Google+ but we’ll see how that plays out. They are spending aggressively to stay ahead of the competition."
CNBC Data Pages:
Scott Kessler does not own stock and Standard & Poor's has no financial relationship with Google or Motorola Mobility.