Google: I See a Bargain Here

Some Netbook computers are breaking the $300 price barrier. DELL has announced that it will produce a computer that uses "TV white space". Google (GOOG) is elated.

Google makes its money from advertising. It does not make telephones or computers. According to one of Google's founders, the advent of "white space Internet" will increase Google's advertising revenues by 30%!

The lowest priced Netbook computers do not have hard drives or Windows software. They are designed to be Internet appliances. For those who use Gmail and other Google hosted products, who needs a hard drive? Who needs windows?

In a year or two, the $100 price barrier might be broken and white space transmissions might be available free of charge. When price falls, growth occurs. In a few years, school kids will carry a 2 pound $100 compact Netbook computer instead of a 50 pound sack of text books. They will have access to the whole world of knowledge.

This Christmas Season, a lot of $500 to $1,500 laptops will be purchased. Many of the buyers will never do more than what they could do with a $300 Netbook. The public is not very aware of Netbooks yet. Business people who have them tend to use them as a second, ultra portable computer. The day is approaching when people have extra computers sitting around, like they now have extra calculators.

I can see a Netbook based on Google Android Software in the making. These machines will have the ability to use cell telephone connections if necessary but they will default to white space or WiFi connections. Because the cell phone providers will share in the advertising revenues, carriers will offer machines that assist the customer in reducing his cell phone minutes.

The promise of having the Internet everywhere has been made by WiMax and other "long distance" proponents for years. In numerous markets, the promise is becoming reality. Mobile TV service is sweeping the country.

New 3G Storm phones can be bought for $199 provided one is willing to sign up for a two year data contract at $49 per month. This data plan is unlimited Internet but it includes no regular sell phone service. In other words, a working phone will cost a minimum of $69 per month. Add on TV networks for another $15 to $30. A steep price, but a cheap price for those who need mobile access to the Internet. If a service worker saves one trip a month, he is way ahead. The business that learns to substitute Internet for physical movement will be at a competitive advantage.

The $69 price will fall, especially when white space services start cranking up. The key point is that mobile access to the Internet will generate so many advertising dollars that the service can be made available free of charge. One of the hooks that will speed the adoption is access to entire libraries of books. Consumers will pay for the purchase of books but much less than the total cost of the same book in hard copy.

Google shares are available at less than 10 times earnings. The price today is $257. You had better get these while you can, limited supplies are available at that price. I am not a financial analyst, investment advisor or broker, but, as an amateur investor, I see a bargain here.

Comments

[LA Tech:]

Indeed, you are not a professional investor.

Stick to your day job because Google stock is fairly priced for a one trick pony.

Name any business within Google, other than search, that is generating over $50M per year in revenue!

Google Apps doesn't!

Postini doesn't!

YouTube doesn't!

2008 Nov 25 09:57 AM

[TAlf:]

Xom makes a fortune in oil, Csco in routers and switches, Cat in heavy equipment and Intc in chips. Lot of great, 1 trick ponies out there! The pro investors have underperformed most of the talented amateurs that I know, of late.

2008 Nov 25 11:48 AM

[NW Tech:]

TAlf 1 Comment Nov 25 11:48 AM Xom makes a fortune in oil, Csco in routers and switches, Cat in heavy equipment and Intc in chips. Lot of great, 1 trick ponies out there! The pro investors have underperformed most of the talented amateurs that I know, of late.

______________________...

None of your analogies here are valid. Cisco has a wide range of products that generate 3-4-5-6-7% of overall business. So does Intel and CAT has a very wide range of heavy equipment that generates decent percentages of business.

NONE of Google's non search businesses ALL ADDED TOGETHER generate more than 1% of Google revenue OR profits.

NONE!

Amateur investors are amateur for a reason!

2008 Nov 25 01:46 PM

[TAlf:]

Please, Xom does 1 thing, Toyota makes vehicles and Boeing makes aircraft. While they each make different flavors and colors, they, like Cat and Intc, do 1 thing very well! Rockerfeller became the richest man in the world from oil, amazing that he didn't need to herd sheep or start a chain of bowling alleys!

2008 Nov 25 02:31 PM

[Proameteur ...:]

Let's not get hung up who is an amateur and who is a professional investor. The fact is, the majority or professional investors are wrong the majority of the time. It's only thanks to careful money management that they ever make a profit. Often this money management advantage fails due to over emotionality and they get wiped out just like anyone else , as the current position many hedge funds find themselves in demonstrates.

There is no intellectual authority in being a professional investor. Most of the advice professionals give is biased crap. Only successful investors whether amateur or professional are worth listening to. Trying to pull professional rank on those opinions you consider amateur is just a sign that you don't think you opinion is valid enough to stand on its own. The fact that Google will see a large increase in revenue due to the white space advertising, is a valid reason to consider their future prospects and share value, as improving significantly - cetirus paribus - which of course they never do. Nevertheless it is a very significant factor that could overide many others that might change. So I think the point made by the author of the article about google currently being a good bargain could well be correct. Time will tell.

2008 Dec 05 04:17 PM