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CIBC is out with a cautious call on Google (NASDAQ:GOOG) saying they believe the company is bidding an amount in excess of $4.6 billion for the FCC's 700 MHz wireless spectrum auction, which is expected to start January 24, 2008.

The firm believes most investors expect Google to bid more as a matter of principle than putting in a bid to win, mainly showing its support for open wireless networks, bidding no more than the $4.6 billion reserve auction price for the "C block" in this auction. However, if Google ends up winning this auction, they expect the win to pressure the stock in the near term due to lower interest income and concerns that op-ex could increase to support a more aggressive expansion into the wireless business.

Winning the spectrum bid would mean spending $5 billion or more on the spectrum purchase, while building and operating a wireless network could cost about $10 billion more. More likely, the firm expects Google would partner with a network provider, in the event it wins the auction. If the company chooses to build and operate its own wireless network, they believe the adverse stock price impact will be stronger.

Overall, they view a potential spectrum auction win as a negative for Google.

Notablecalls: Capex has been an issue for Google for quite some time already. I'm sure that market participants would not take kindly to a $10-$15 billion foray into wireless networks (on top of the usual $2+ billion capex for core business).

I suspect GOOG stock may see some pressure following this call.

Source: CIBC Gets Cautious on Google