Ask the average kid on the street what the most exciting technology company is, and he is highly unlikely to say it's Google (GOOG). Even if you ask a room full of stock analysts, Google probably wouldn't get more votes than ideas like Apple (AAPL), Facebook (FB), Twitter (TWTR), Tesla (TSLA) or 3D Systems (DDD). So why then is Google my top tech idea? The answer to that question is basically because Google does everything right. We got several new examples of just that over the last couple days too, so pay attention.
Google Stays Relevant
The hardest thing for a technology company to do is to stay relevant. Google has done so for more than a decade now and it is not accidental.
Google is not married to what it is today though. It's a story told a thousand times over. Businesses and industries get comfortable and cocky and believe in themselves and their great accomplishments. Then some poor soul in a dark dorm room, out of necessity and/or ambition, invents a better way and disrupts the industry and replaces the behemoth who rules it. Not Google though. This company is ready and willing to adapt as the world around it changes. This is not in any way a prideful company, but instead one that takes its competition seriously and sees competition everywhere it should, which is everywhere. Rather than sitting atop its search engine hill counting clicks and collecting advertising income from traditional sources, it recognizes snakes slithering towards it even when they are well off the beaten path, and it looks for new hills to conquer too.
Apple's challenge to Google's Internet dominance and the rise of mobile Internet usage, and more importantly, how Google responded, is one great example of what sets Google apart from rivals and why the company is competitive today and the stock richly valued. Before Microsoft (MSFT) even noticed that Windows might someday be made obsolete by Apple, instead of resting on its laurels, Google acquired Android Inc. in 2005. While Palm, Motorola, BlackBerry (BBRY) and Nokia (NOK) struggled to stay solvent in the years that followed, Samsung and others who adopted the Android operating system for mobile phones and tablets held ground against Apple's fierce charge.
Google was not finished nor satisfied with just meeting Apple at the product platforms it established though. Rather, Google takes what it learns and beats its competitors at their own game. So, Google recognized the great opportunity in computing across virgin ground and set forth to do so. Wearable technology and managing the home are now on Google's radar, with Google Glass about to become the next hot thing everyone must have. Google's recent acquisition of Nest Labs, Inc. marked its physical entry into the American home, where it has been virtually present for a long while now. Google appears ready to make Bill Gates' computing vision, which I was once dazzled by while enjoying a Microsoft annual report more than ten years ago, a reality.
It does the right thing across corporate functions beyond just operations. In finance, the company announced it will be splitting its stock in April, offering a new class of shares so as to not dilute the voting interests of the founders. This is something I view important for the company's valuation, though some would disagree. I believe that despite the value insignificance of a stock split, its price at over $1000 a share keeps some investors from considering ownership. When you limit the demand in your stock, you limit its valuation. I believe this is one area in which Apple has gone wrong, and Google is doing better, though Google's stock price will not even drop to as low as Apple's is currently. Still, it's another example of Google doing it right, though some shareholders seem to disagree due to the voting right quarrel.
Admittedly, we are not sure Google's earnings report offered another perfect example of the company doing right by its owners. Even as Google missed EPS expectations (slightly by 1.6%), though, the shares still rose 4.0% Friday because revenues beat expectations and the company immediately divested itself of a poorly performing business segment, Motorola, which it sold to Lenovo (OTCPK:LNVGY). Paid clicks of online ads soared 31%, though the price received per click drifted 11% in the quarter. Google, like every online operator, is still figuring out how to best monetize mobile.
Google is not stopping and settling at its wildly popular utility, though, and that is what has investors excited. No, Google is seeking to be an important part of the reinvention of modern living. Therefore, it is not just a provider of a good or service, but a philosophy penetrating our way of life. So even while it trades at a premium to another far more popular brand in Apple, and despite trading at a discount to the latest and greatest fad at Twitter and Facebook, it fits somewhere in the middle. And that is just fine for its shareholders, because somewhere in the middle of fading and trending is lasting.