Even as the broader market continues its
bear-market bounce, Google is taking it in the teeth. To make sure we had a good handle on what the smart money is worried about, we checked in with some. To wit:
- December ComScore bad (discussed in detail here)
- Concern that Google is actually serious about spending tens of billions of dollars to become a wireless company (or at least $5 billion or so to buy spectrum).
- Law of large numbers
The recession concerns are valid, as is the “law of large numbers” (although the latter is hardly news–we expect Google’s P/E to compress to the standard 25X-30X growth company multiple, and we’re now getting there.) The Comscore numbers certainly weren’t good news, but they’re also just a single month of notoriously noisy third-party data. The wireless concerns are also valid, if short-sighted.
When Google went public, Larry and Sergey were crystal clear that there would come a day when they would make big long-term bets at the expense of short-term performance, and this may be one of them. Investors love to jawbone about how they care about the long-term, building shareholder value, etc., but for most of them this is hooey: When push comes to shove, the majority of investors care about only one thing–today–so the idea that that they might be forced to wait literally years for a multi-billion-dollar wireless bet to pay off is scary.
But we’re standing behind Larry and Sergey on this one. If Google sees a big opportunity in using its cash pile to buy spectrum and then force Verizon, et al, to open their networks, they should go for it. The wireless opportunity should be huge, Google has the time and strength to roll the dice, and at some point PC-based search growth will slow and the company will need a new growth engine.
Yes, we worry about focus: Larry’s other recent brainstorm–that Google was going to become an renewable energy company–was downright terrifying. The wireless push makes sense, though. Which isn’t to say it won’t result in Google’s stock being parked by the side of the road for a few years.
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