Between 2000 and 2008, Cisco (CSCO) was a strong company that was expanding heavily into many different areas of business. It was normally thought to be a good thing, however, it became a massive problem for them as the company became too "fat". Now CEO John Chambers is trying to restructure the company so it maintains a strong focus on their core business.
One of the reasons companies like Apple (AAPL), Chipotle (CMG), and Coca-Cola (KO) are so successful is because they only have to focus on a small number of products or services. Now when we take a look at Google (GOOG), we see a healthy company generating a lot of profit. However, if we look into its string of acquisitions and their business model, I honestly believe that Google will eventually become too "fat" and will end up being worse than Cisco if they continue to expand at this pace.
Let's take a look at some of the products/services that Google offers. Here is a list of some of them:
- Google Search Engine
- Android O/S
- Google Chrome O/S
- Google Mini
- Google Venture Capital
- Solar Energy
- Wind Power
- Google Talk
- Google TV
These are just some I can think of. However, with the acquisition of Motorola Mobility (MMI), Google might be making a foray into smartphone production. The issue with Google is that if it strictly focused on software, then the company would be fine. However, Google is also going into hardware which will prove difficult to manage in the future. I can understand that management likes to diversify, but I honestly believe they might be overdiversifying.
I really like Google and use several of their services, but management should learn from Cisco and see that when a company becomes too "fat", it is a major problem and it becomes difficult to fix. If Google doesn't start to maintain focus on its key services, such as Google Search, then competitors could come in and take market share from them. Microsoft's (MSFT) Bing has already began taking some market share from Google. Time will tell, it will be a while before the full effects of Google's expansion will be known. Hopefully, Google's management can find a way to start trimming down to their core business.
Please feel free to post your comments, I would love to hear from you. This is my first article so any feedback is much appreciated. Thank You.