Google's Potential Breakup Could Unlock 20% Value, But Search Giant Likely Won't Pursue Split Voluntarily, Says Top Analyst: 'Probability…Is Exceptionally Low'

Deepwater Asset Management’s managing partner Gene Munster said that the potential breakup of Alphabet Inc. GOOG GOOGL could unlock substantial value for the company.

What Happened: On Wednesday, Munster joined CNBC’s ‘Fast Money’ to discuss the potential implications of a Google breakup. “I think this could unlock 20% of value.”

According to Munster, the most likely scenario would involve Google separating its ad network, which he referred to as the “ugly piece” of the business.

Despite contributing 11% of the company’s revenue, this segment has been on a decline and has long been speculated to be a target for a breakup by regulators, said Munster.

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“Where does Gemini fall in a potential breakup? And most likely that goes with the Search business, which is where … more than half the value is today,” he said.

He also discussed the cultural aspect of Google, stating that the company has lost some of its sparks and a breakup could reignite the urgency around different business segments.

However, he also noted that the probability of Google voluntarily breaking up is “exceptionally low.”

While a $GOOGL break-up could be in the company's best interest, the tech giant likely won't split into smaller parts willingly, says @deepwatermgmt's @munster_gene. He assesses the potential impact: pic.twitter.com/TVBqSkxVPU

— CNBC's Fast Money (@CNBCFastMoney) August 14, 2024

Why It Matters: The potential breakup of Google has been a topic of discussion among analysts and investors in light of the Department of Justice’s (DOJ) investigation into Google’s dominance in the search market.

Previously, Jefferies analyst Brent Thill also said that a breakup or business separation could benefit shareholders. “We don’t believe a full breakup would happen. Even if it did, it would be good for shareholders because the sum of the parts is greater than the whole.”

Wedbush’s Dan Ives also stated that a breakup of major tech companies is “highly unlikely,” adding that he expects “business model tweaks and heavier scrutiny of M&A.”

Price Action: At the time of writing, Alphabet's Class A and Class C shares were both slightly down, trading at $159.75 and $161.48. During the regular session, Class A and Class C shares closed at $160.37 and $161.03, respectively, according to Benzinga Pro data.

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Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.

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