GOOG Down With The Market
Shares of GOOG are trading down today with the rest of the market, off about $2 to $530. The company’s search business will likely drive solid growth for the balance of the year, but investors are concerned with increasing costs and lack of a second growth engine. Potential catalysts include Android and mobile adoption as well as benchmarks surrounding newer initiatives (which up until now have mostly been disappointing). GOOG trades at approximately 20x 2010 EPS and 16x Enterprise Value / EBIT. Google’s Attempt to Preempt The Mobile Carrier Gets Disconnected As Verizon Says “No” To Nexus One (Business Insider)
In a statement yesterday, Google announced that the Nexus One will not be coming to Verizon after all. Dan Frommer at Business Insider points out that Nexus One was supposed to give Google the exclusive on selling what was then the world’s best Android phone and it would support the company’s e-commerce storefront. In other words, essentially disrupt the carriers by selling direct to consumer. “But so far, that doesn’t look like it’s going to happen, mostly because Google is counting on the same mobile carriers to service its phones that it was trying to disrupt.” Bottom line, all that matters is that people are buying Android phones.
Google Keeps On Failing But At Least It’s Trying (The Wall Street Journal)
While perhaps Google’s phone, the Nexus One, helped further the Android ecosystem, the purpose of offering a phone through a different channel was meant to revolutionise sales in the mobile carrier business. As Dan Frommer at Business Insider noted, that did not happen. Andrew Corn, contributor at Seeking Alpha, is less critical of Google and realises that the company has room to experiment. He encourages “more exploration even if there are failures, because it will lead to unexpected creativity and eventual wins.” And Google could use a win right about now.
Google Purchases Labpixies To Try And Stay Relevant In Social Networking (Google)
Google announced that it has acquired Labpixies, a maker of popular widgets for its iGoogle and OpenSocial platforms. Google has been on a huge shopping spree recently, from small acqui-hires to big acquisitions such as AdMob and potentially ITA Software for $1 billion. Business Insider’s Pascal-Emmanuel Gobry suspects the acquisition is part of Google’s push to remain relevant in social despite the question marks over Google Buzz and Facebook’s plans to take over the Internet.
Google Taken Off Conviction Buy List At Goldman (Reuters)
Goldman Sachs Internet analyst, James Mitchell, removed Google from the Conviction Buy List over the weekend “due to recent underperformance following in-line 1Q results.” He retains his Buy rating and $680 6-month price-target based on attractive valuation as well as mid-teen earnings growth as well as share gains in display. Bespoke Investment Group notes that “if an expectation of a 56% annualized return over the next six months doesn’t represent conviction, we’d like to see what does.” We would, too.
Not Surprisingly, Google Losing Market Share In China (The Wall Street Journal)
Analysys International, a Beijing-based research firm, noted that Google’s market share dropped to 31% in the first quarter, down from 36% in the prior quarter while Baidu’s market share rocketed to 64% up from 58%. Not surprising given the recent battles with the Chinese government. That said, Google reseller sales are starting to stabilise and analysts believe that the company will “least retain ad revenue from export-oriented companies in China who target users of Google’s international sites.”
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