Are you like everyone out there, believing that Google is a one trick pony? That it dominates search and that's about it? I've said a few times that I didn't think Google was a one trick company but I feel like it is becoming less and less the case. Let's just recap. A few years ago, Google became the dominant internet company thanks to search. It's been fighting for dominance ever since, mostly with Microsoft (MSFT), Facebook (FB) and Apple (AAPL). Then, thanks to its purchase of Android, Google became the 2nd major mobile operating system. But in all honesty, having a successful mobile O/S was never going to be enough. It also launched a browser, which has been growing and is now the most used on the internet. Google also launched Google+, a competing social product.
It's become clearer and clearer that controlling the whole infrastructure would turn out to be key in this way. Apple had an advantage by producing not only the operating system of its phone but the actual hardware behind it. So Google went ahead and started to sell its own devices, which turned out to be more difficult than planned. Thanks to its huge cash reserves, Google decided to go ahead and purchase Motorola, giving it the ability to do the same thing. That is a step that Facebook is rumored to be working on and that Microsoft has gone ahead with for its upcoming Surface tablet.
The Next Step
Then, Google started working on a TV offering, which will eventually compete for living rooms with Apple's AppleTV and Microsoft's Xbox franchise. Facebook has not been looking into this phase up to now from what we know. Google has also been putting a lot of focus into into cloud products.
Going Further Than Anyone Else
What stands between users and their actual web content into their hardware no matter if it's a computer, tablet, phone, etc? I'd argue that there are two things. We need power (or something to charge mobile devices) as well as a network to connect to. Turns out that Google has been making significant investments into wind power and its most recent entry into providing a network connection in Kansas City could be just the beginning.
Could This be Just The Start?
It's fair to say that while I'm not convinced that Google could pull this off, I am certain that its competitors could not. I mean, just think about it.. What if a few years from now, you paid one monthly bill to Google, which would provide you with:
- internet connection
- cloud storage and access to its cloud applications
- phone signal
- TV offering
- the actual hardware for all of these products
- clean/green energy for your house
Wouldn't it be simply amazing?
And That's Not It
Google continues to make progress in its self driving cars, which have now driven 300K miles without an accident. It is now ready to have certain employees start to use those cars to commute to work. How? It has started getting licenses to drive those cars in some areas outside of their private racecourses.
Google has also been working on projects such as new types of glasses that are much more technically advanced than what currently exists
What Does All Of This Mean?
I personally draw 3 main conclusions from all of this.
The New Google Is A Force To Be Reckoned With: When Larry Page came back at the top, he promised to make Google nimble and quick again and that is exactly what seems to be going on. Google is making very aggressive moves and competing in ways that its competitors might be unable to do. I would also imagine that because Google hires so many smart people, having huge, ambitious, long-term projects helps the overall feeling of employees, something that Larry Page would be well positioned to understand.
There Is Significant Upside To These Initiatives In The Medium Term: For years, almost everyone has been valuing Google exclusively as a search company. There seems to be a decent chance that some of its other projects will end up having a signifcicant impact on its bottom line. These are bold and risky moves that seemed like spontaneous, perhaps even illogical moves. As times goes by though, it seems more and more logical.
Long Term, Google Is Incredibly Well Positioned: Auto companies like GM and Ford (F) are not doing very well financially. Energy companies invest very few resources into R&D. Because Google has huge cash reserves and an extremely bright, talented and motivated workforce, it is able to allocate resources to projects that are very long term with unclear benefits. That can end up being a gamble that few others can take and thus a very lucrative one. Who else is working on this stuff?
More Reason To Buy GOOG With A Long-term Perspective
I personally think that if you look at Google's P/E, at its current products, revenue and profits, the stock looks either a bit cheap or fairly priced. However, if you start considering everything else that is going on at GooglePlex, the projects, the new attitude, I think it becomes a very strong long-term hold. It's difficult/impossible to know which of these projects will end up paying off but it's fair to say that some of them look like they will be paying off soon.