Google's mission for the next six months is to chop Amazon.com's (AMZN) amazing PE ratio down to size.
It's going to do this by copying Amazon's most important digital initiatives, its cloud and its tablet.
The Google Compute Engine is a much more direct competitor to Amazon's EC2 cloud than anything the company has previously offered. Customers will now be able to run whatever applications they want in the Google cloud, just as they can with EC2, Microsoft's (MSFT) Azure or Rackspace's (RAX) cloud service.
The old Google App Engine didn't do that. It restricted users to the user of Google tools, and made it impossible to move workloads off Google.
What reporters will be looking at most closely here, of course, will be pricing on the Compute Engine. Can Google deliver this service at a price competitive with Amazon.com, as transparently as Amazon.com, and still make a profit? It will take some months to answer that question, but speculating on it will probably help hold Google at current levels and depress Amazon.com shares.
That's also the aim of Nexus 7, a seven-inch tablet that looks like the Kindle Fire, offers services like the Kindle Fire, and is even priced just like the Kindle Fire. It will run the latest version of Google Android, code-named Jelly Bean, and is being made by AsusTek in Taiwan.
Wired has gotten its hands on the new tablet and says Amazon has much to fear. If they weren't using the same operating system you would think Amazon.com might be suing for patent infringement.
There is good reason for this. While Google shares have lost 10% of their value so far this year, Amazon's have gained over 30%. Google's PE ratio has fallen to 17.5, while investors are now paying 185 times Amazon.com's earnings, and its market cap is now about 60% that of Google.
AMZN is still well short of its October high of $246, but investors saw an upside earnings surprise in April and are hoping for more good news in the company's next report. If that news isn't stellar, however, AMZN is going to get hit hard.
Google won't cry in that case. Not even a little bit.