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GOOG Up As Market Holds Tight
The markets are edging higher despite new home sales hitting a 5-month low and persistent fears that the economy is taking a double dip dive. Shares of GOOG are up stronger than the rest of technology. Catalysts include continued Android momentum in the smartphone and tablet markets worldwide; Motorola acquisition approval and integration; regaining ground in China; any revival or partners for Google TV (including Motorola); the roll-out of Google Music and social network Google+; and progress in other newer initiatives (location-based services, mapping, gaming, Chromebooks, etc.). The stock trades at approximately 10.2x Enterprise Value / EBIT, inexpensive relative to recent trading levels.
Android Still Leading Smartphone OS Platform
(The NPD Group)
Surprise, surprise. Android is still the leading U.S. smartphone platform, with 52% share in the second quarter, according to NPD Group. Of note, Motorola’s market share fell in the quarter to 9% from 12% the year prior. Motorola’s overall Android sales halved since last year from 44% to 22% in the face of Android competition from Samsung and LG. However, Google’s recent Motorola purchase will likely bring new life to the phone manufacturer.
What If Google Went The Apple Route With Motorola? (9To5Mac)
There’s a good reason why Apple’s products “just work.” But it’s been a bumpy road from the onset as competitors and critics ridiculed its vertically integrated approach to business. But what if Google actually tried the Apple model with Motorola (which today makes about one in 10 Android smartphones)? According to Piper Jaffray, Android proprietary and exclusive to Motorola would add about 35% to operating income and by 2015, the phone business would add $10.5 billion in operating profit and $56 billion in revenue. There’s only a few problems with that: significant share and ad revenue loss.
Samsung Could Squeeze Google In Response To Motorola Acquisition (Forbes)
Samsung’s chairman has asked the firm’s top management to strengthen its software capabilities. This could be a longer-term threat to Google. Google is the market leader in the smartphone operating system market with Samsung as the largest player in the Android ecosystem. With the help of Android software, Google mainly makes money through mobile advertising revenues as Google is the default search engine on Android smartphones. One good thing, it’s also forcing Samsung to develop and innovate.
Motorola Helps Google In Two Key Areas, Both Of Which Have Been Well Discussed
The deal with Motorola solves problems in two areas:
- It will add 17,000 patents to Google’s patent portfolio to help defend Android and the ecosystem from Microsoft and others. The benefits should be both immediate and long lasting.
- The three main competitors for Android all have vertically integrated OS and smartphone manufacturing either in-house or through mutual agreement. Google will obtain a strong smartphone manufacturing partner with a checkered history.
The market sell off has negatively affected Google’s share price and August is historically known for weakness in technology stocks. Once the selling abates, Google will become very attractive.
HTC Continues To Insist The Motorola Acquisition Was Good (The Wall Street Journal)
HTC doesn’t plan to ditch Google’s Android or build its own rival operating system in the wake of Google’s acquisition of Motorola, according to the CEO. Mr. Chou says, “we welcome the news of today’s acquisition, which demonstrates that Google is deeply committed to defending Android, its partners, and the entire ecosystem”. He was quick to point out that the OS is only part of the device’s “ecosystem” and that HTC had the means to differentiate its phones in other ways.
Traffic From Streaming Video Expected to Grow by at Least 1300% (ReadWriteWeb)
If you think we’re eating up a lot of bandwidth streaming video now, just wait. That 3.45 Tbps figure from last year will be blown out of the water within five years, according to a detailed report put together by Akamai, Harvard University and University of Massachusetts. The researchers suggest that “it is reasonable to expect that throughput requirements for some single video events will reach roughly 50 to 100 Tbps” within two to five years. The low end of that estimate represents an increase of about 1349% from 2010’s peak (at least as far as Akamai’s CDN is concerned). Great news for YouTube.