Profiting from Google GOOG

[scsl]

hi Staybaker

i was out the whole day and missed the documentary.

do you mind sharing with us the main points and anything that you thought stood out?

thx,
scsl

 

[scsl]

Why Microsoft won't buy Yahoo
An idea whose time will never come

By John C. Dvorak
Jun 30, 2006

BERKELEY, Calif. (MarketWatch) -- Sometimes you have to laugh out loud when a report comes out with analysis and suggestions that are so far out in left field that they can only be categorized as completely insane.

Thus the chit-chat around a Merrill-Lynch report suggesting that Microsoft followed by a blogosphere eruption with actual living humans thinking this notion is in any way whatsoever a good idea.
It's not. Here's why.
Yahoo's market cap has been running around $42 billion. Microsoft could buy Adobe or even General Motors and get more for its money. They are cheaper than Yahoo.
But it's not just that Yahoo is too expensive. Yahoo also doesn't fit well into the Microsoft world.
First of all Yahoo is a content generator and an advertising selling machine. It publishes old-fashioned information on the Internet. It uses all sorts of gimmicks such as free email, classified ads and directories to cajole people into returning. It also utilizes a search engine to drive traffic.
Microsoft is a software publisher that dabbles in content publishing with MSN. Everything Yahoo does MSN does. MSN may actually do it better except for maybe the ad sales. If it wants to improve the advertising game it can go raid the Yahoo staff for a lot less than $42 billion.
Start with Yahoo COO Dan Rosensweig, who happens to be one of the greatest salesmen in the world, seriously. I'm sure he'd go for less than a billion.
Microsoft is already a top five website for traffic worldwide. Yahoo is arguably number one for page views with MSN probably number two.
The only real reason for Microsoft to absorb Yahoo would be for its customers, many of whom are already Microsoft customers. This could put Microsoft into a 1-2 position or minimally second of the top five sites.
But a likely scenario is that Microsoft would do what it always does when it acquires a company: meddle and ruin it. Maybe ruin is too harsh a word, but it would change things enough so that anyone working at Yahoo, if given the chance, would flee to Google.
Google could eventually be the big winner in a Microsoft-Yahoo merger and dominate the any combined Microsoft-Yahoo operations. Right now Yahoo is the only blocking mechanism on the net that is keeping Google at bay.
And note, right now with MSN combined with the online gaming initiatives done by Microsoft and the Xbox team, the company is far in front of Yahoo technologically.
Anyone who follows this business knows that much of the reason for a high rank online is residence time. Yahoo has simply, as an online entity, been around a lot longer than Microsoft. Google is the upstart to be worried about.
Buying Yahoo doesn't solve any of Microsoft's issues with Google, all it does is bring in all sorts of redundancies which include search, forums/groups, free email, online apps and other things done by both companies. Ironing out these redundancies would be a nightmare.
And this wouldn't be one of those "buying and killing the competition" mergers because the real competition is Google. Whatever advantage would be gained by Microsoft would also be gained by Google.
This Microsoft-Yahoo deal would actually be like Google buying and killing the competition without having to spend a red cent.
But none of this will ever happen because at the base of all this Microsoft is a software company and it uses online to leverage that fact. Buying out an old first generation directory/search engine company for $42 billion can make no sense whatsoever to anyone at Microsoft.
At the end of this column I was thinking "well, what if Yahoo was $10 billion?" Would that make more sense? I don't think so since the game would still go to Google.
On the bright side there would be some amusing monikers for a combined Microsoft-Yahoo, but it would eventually end up as Micro-who?
Conclusion: no sale at any price.

http://www.marketwatch.com/News/Sto...C85FF7}&source=blq/yhoo&dist=yhoo&siteid=yhoo


If Microsoft buys Yahoo then it is game over for Yahoo because all the talented people in Yahoo will jump ship to Google and Microsoft will just end up owning a shell.

 

[scsl]

eBay stock is slightly up from its 52 week low while GOOG keeps on keeping on!

eBay's continuous downtrend is not being helped by further downgrades, the latest coming from Citigroup:

In a report issued last Thursday, Citigroup analyst Mark Mahaney cut his long-term earnings growth forecast for eBay from 22 percent a year, on average, to 20 percent a year. Citing competition from Google Checkout as his main reason for cutting his projected growth rates, Mahaney slashed his target price for eBay to $40 from $51 per share, too.

http://internet.seekingalpha.com/article/13313

furthermore, it seems eBay is genuinely concerned about the impact Google Checkout will have on PayPal.

When Google first released its Checkout offering last week, eBay made statements to the effect that it was not worried about Checkout, reassuring investors that it was not a PayPal competitor, because Checkout was targeting a different market. [For example, G-Checkout cannot be used to make payments from person to person.]

eBay’s recent actions proved the contrary. Citing Checkout as a new service “without a substantial historical track record of providing safe and reliable financial and/or banking related online transactions,” the Company has banned Checkout as a payment method for Ebay users.

 

[scsl]

UPDATE 1-RESEARCH ALERT-Piper ups Google Q2, 2007 earnings view

July 10 (Reuters) - Piper Jaffray on Monday raised Google Inc.'s (GOOG.O: Quote, Profile, Research) second-quarter earnings and revenue estimates based on strong search volumes, share gains and stable search pricing trends.

The brokerage, in a research note, said it now expects the Internet search leader's second-quarter pro forma earnings per share to be $2.26, up from its earlier estimate of $2.16.

The brokerage said it expects Google to have a net revenue of about $1.67 billion, compared with its earlier view of $1.59 billion.

The brokerage also raised its 2007 pro forma earnings view to $12.63 a share from a previous estimate of $12.12 a share.

Piper said checks and analysis of industry data indicated that Google continued to gain share in the second quarter in both the U.S. and internationally.

The brokerage has an "outperform" rating and a price target of $600 on the company's stock.

Shares of the company fell about 25 cents to around $420.20 in morning trade on the Nasdaq. (Reporting by Kuncheria Cholemkeril, Deepti Chaudhary in Bangalore)

http://today.reuters.com/stocks/Quo...T_0_TECH-GOOGLE-RESEARCH1-UPDATE-1.XML&rpc=66

 

[scsl]

Out of 38 analysts tracked by the San Francisco investment research
firm StarMine, 31 have Google's stock rated either "Buy" or "Strong
Buy." Nobody says "Strong Sell."

Piper Jaffray's analyst Safa Rashtchy... says the company's stock price
will rocket to $600 during the next 12 months. He admires Google's
aggressiveness in going after new markets with products such as Google
Checkout, an online payment system that debuted on June 29.

Rashtchy says investors will pay 50 times Google's earnings as long as
the company continues creating cash and growing every year. He's
expecting Google to produce a "substantial" $3.5 billion after-tax
profit in 2007.

Laura Martin, senior media analyst at Soleil-Fulcrum Research in New York, says Google's current share price embeds the assumption of 21% earnings before interest taxes, depreciation, and amortization growth every year for the next decade. "No advertising-driven business since 1947 has achieved anything faster than 17% per year," she says.

and of the selling of stock by Google executives??

She's one of the few analysts to rate Google at "hold," but even she isn't worried about the company's insider stock sales. "It is typical of Internet senior managers to sell shares under pre-established plans," she says. She thinks it's an appropriate way for Google executives to fund their lifestyles.

http://www.businessweek.com/investor/content/jul2006/pi20060711_169640.htm?chan=top+news_top+news

 

[scsl]

finally found the date for Google's 2Q results announcement: july 20

from what i have read/researched, it sounds as though Google may well exceed 2Q estimates, so "expect upside".

the following link is one of the articles - it's from the analysts at Piper Jaffray. with the upcoming results of many major tech/internet companies expected within the next few weeks, sp of stocks in the nasdaq may get wild, particularly if they surprise the market.

http://battellemedia.com/archives/Rashtchy - Silk Road 0710.pdf

this is what Piper Jaffray said about Google:

Google (GOOG-OP) – Expect Upside– Positive Reaction
What to Expect. Google reports 2Q06 on July 20. We increased our estimates for Google today, increasing net revenue estimate from $1,589M to $1,672 and increasing our PF EPS estimate from $2.16 to $2.26 (see our GOOG note). We believe Google may still
exceed our new Q2 estimate of $1,672M (9% q/q) and GAAP EPS of $1.86/$2.26 PF (consensus estimates are $1,631M and $1.94 GAAP/$2.20 PF, respectively). However, we believe some of the very high estimates on the Street may be too optimistic as the
accuracy of ComScore data, on which all these estimate increases are based, is highly suspect. In fact, we believe it is very unlikely that the volume of search increased sequentially by the mid 20s level as ComScore is suggesting. However, we do believe the data is directionally correct and that Q2 was indeed stronger than expected. We estimate EBITDA of $1,038M and an EBITDA margin of 62.1%.

Margins Should be Within Expectations. Although we believe additional spending may pressure margins slightly considering the
announced distribution deals with Dell and Adobe, we continue to believe that the incremental investments will further solidify
Google's leadership position in the marketplace and lead to continued share gains over the long term.

Areas to Watch. We expect Google to highlight the recent Google Checkout product during the call. Specifically, we would look for insights regarding consumer and merchant adoption, incremental effect on revenue and costs and details regarding fraud
prevention/liability mitigation. During the call, we would also focus on progress with extending the Google platform beyond paid
search including progress with Google Checkout, Print, Radio, Wi-Fi, etc.

Takeaway. Our checks with advertisers and search engine marketing firms and analysis of industry data indicate that Google
continued to gain share in Q2 in both the U.S. and internationally. The Google brand is synonymous with search, and we believe
innovations like Google Checkout will further solidify Google's position with both consumers and advertisers. We continue to believe that the adoption of Google Checkout may result in upside to long term estimates.

for those who are interested in the US tech/internet sector, here's some music to your ears:

Industry Commentary
We expect strong results from Google and Yahoo next week and, given current
valuations, we believe the stocks will react positively. The continued strength of
search in a seasonally slow Q2, which in the past has been disappointing, could be a
major catalyst for the Internet sector which continues to trade near trough
valuations. We expect a recovery to first benefit the large cap names and then
trickle down to the stocks with the most solid positions and modest valuation,
including Netflix, Digital River, Digitas and ValueClick. In the following pages, we
provide our detailed expectations for the companies that will report next week,
Yahoo, Google, eBay and Digitas.

cheers,
scsl

 

[scsl]

http://www.businessweek.com/technol...op+news+-+preview,+approve,+publish+from+here

good article on expectations for technology companies, in particular internet companies. provides info on the outlook of this sector.

 

[scsl]

GOOG 2Q earnings are out!

Google's 2Q Net More Than Doubles

By Bloomberg News
July 21, 2006

Google Inc., owner of the most-used search engine, said second-quarter profit more than doubled as the company took market share from Yahoo! Inc. and Microsoft Corp.

Net income rose to $721.1 million, or $2.33 a share, from $342.8 million, or $1.19, a year earlier, Google said yesterday in a statement. Revenue rose 77% to $2.46 billion. Excluding sales passed on to other Web sites, revenue was $1.67 billion, compared with the $1.65 billion estimate of Jefferies & Co. analyst Youssef Squali.

Google parlayed its dominance of the Internet search market into a rise in profit. Google beat analysts' predictions with software that better targets ads to consumers, unlike Yahoo! Inc., which this week reported sales that missed estimates.

Google's search engine is used about three times more than Yahoo's, according to ComScore Networks Inc.

"These numbers showcase that Google is predominant in the areas where they're playing," an analyst at San Jose, Calif.-based Enderle Group, Rob Enderle, said. "Yahoo's numbers indicated they were being hit by Google.This confirms that."

Net income included a $55 million gain from the sale of a stake in Baidu.com Inc. Profit excluding one-time items was $2.49 a share, beating the $2.25 estimate of Squali, whom StarMine Corp. ranks among the most accurate Internet analysts.Analysts on average predicted profit of $2.22,based on a Thomson Financial survey of 32 estimates.

Shares of Mountain View, California-based Google, down 7% this year, rose $9.88 to $397 in extended trading. They earlier fell $11.88 to $387.12 at 4 p.m. in Nasdaq Stock Market composite trading.

Google stuck to its policy of not forecasting earnings, a practice CEO Eric Schmidt, 51, said is designed to prevent managing earnings to analysts' estimates.

"We're very, very happy with having such a strong quarter," in a period that is seasonally weaker, Schmidt said on a conference call with analysts.

The results allayed concerns about the strength of Internet search after Sunnyvale, California-based Yahoo said second-quarter revenue was $1.12 billion. Yahoo also delayed the introduction of online advertising software designed to match Google's systems.

http://www.nysun.com/article/36487

 

[scsl]

YouTube bought for $2.2 billion!

Yeap!! Amazing stuff! And guess who's the buyer..... Google of course!

http://www.marketwatch.com/News/Sto...01771BF-DDDB-4420-AB44-2AEB9005A63F}&keyword=

 

[lancedefrance]

Re: YouTube bought for $2.2 billion!

Actually I think GOOG will go down as the law suits will increase if the keep you tube as it is. Companys will also be sueing for more $$$ as GOOG has deeper pockets.

Now GOOG may decide to take all copyright material off you tube which will reduce their traffic significantly

either way GOOG is going down but thats just my interpretation and i am a complete NOOB when it comes to stocks

 

[swingstar]

Re: YouTube bought for $2.2 billion!

Don't forget Google already have Google Video. So re: all these talks of lawsuits, it's not as though Google are stepping into unchartered territory. They've probably had copyrighted vids on their servers for ages, but if not, then they'll probably apply the same restrictions to YouTube.

 

[scsl]

GOOG is up over 7% tonight after reporting 3Q results that beat estimates!

It's currently at $457.69... I'm guessing that it shouldn't be long before it breaks its previous record high of about $475.

 

[scsl]

Up another 3% tonight...

I got in at $469 and am hoping to see GOOG go above $500 in the next few weeks. I'm off to bed now, it looks like GOOG could close in record high territory this session!

Now at $472.64.

 

[wayneL]

Up another 3% tonight...

I got in at $469 and am hoping to see GOOG go above $500 in the next few weeks. I'm off to bed now, it looks like GOOG could close in record high territory this session!

Now at $472.64.

Henry Blodget would be proud.

 

[scsl]

Henry Blodget would be proud.

LOL! It'd be great to see what he thinks of US tech stocks atm... too bad he's banned from the securities industry for life.

As a result of his negative history with the industry, his writings [now] carry a seven-paragraph disclosure of potential conflicts of interest!

Oh and on Google, it closed at an all time high of $480.78. Now for the magic $500 level...

 

[lancedefrance]

Oh and on Google, it closed at an all time high of $480.78. Now for the magic $500 level...

wait for it to go down and bring the whole tech sector down with it although thats not likely to happen following recent news

 

[wayneL]

Henry Blodget would be proud.

Speaking of Blodget, he's got a blog (who doesn't these days), and I just stumbled on it.

http://www.internetoutsider.com/

Cheers

 

[scsl]

New high for GOOG tonight. Atm, it's only $3 shy of $500.

 

[wayneL]

It's amazing what an actual business plan and a viable source of revenue will do for a company!

 

[wayneL]

> $500