Implications for Microsoft in Google-DOJ lawsuit is in ‘fine print,’ Barclays says

The implications for Microsoft (NASDAQ:MSFT) from the Department of Justice’s antitrust lawsuit against Google (NASDAQ:GOOG) (NASDAQ:GOOGL) and the potential remedy are in the “fine print,” Barclays said on Monday.

“With Bing being a small part of the Microsoft top-line (5% of total revenue in FY24), the ramifications of any developments here seem to have been largely ignored based on our investor discussions, particularly with many software investors not having the context of the ongoing trial,” analyst Raimo Lenschow wrote in a note to clients. “However, following the Department of Justice’s long awaited Proposed Final Judgment, we think that Microsoft investors should pay closer attention to any final rulings that come from the case.”

Lenschow — who has an Overweight rating and $475 price target on Microsoft — said if the remedies include ending revenue sharing agreements between Google and other parties around the world or Google syndicating its search offering, Bing could pick up some market share. With this, it could force Google to make some of its technology stack available to partners and make search text ads available for one year to partners in the U.S., and only keep 10% of gross revenue.

“In tandem with this, Google is only allowed to syndicate 25% of search text ads, meaning that partners (like an Apple) would need to backfill their remaining search ads either through their own tech stack, or through a new partner like Bing,” Lenschow added. “This in theory would open up a unique opportunity for Microsoft to capture share for a period of time.”

Despite the potential positive for Microsoft, Lenschow concedes that in the near-term, there will only be “minimal change” and any impact from the resolution of the case is not likely to be felt until at least 2027, at the earliest.