Vikram Saxena

60% of Google Employee Stock Options Are Drowning

This is:
-an anachronistic article (SEEN THE PERFORMANCE OF STOCKS LATELY?)
-making specious conclusions (EMPLOYEES LEAVE TO GO WHERE?)
-based on incomplete information (TSOs ANYONE?).

Google: Android Skepticism, Plunging Stock

A lot of people in New York do not get Google's business investments; a fund manager on CNBC once questioned why having your own browzer helped Google?

Google operates in a chaotic, hyper-dynamic and nebulous domain. The domain is unique because the distribution, marketing and support costs are significantly less than traditional businesses, even traditional software businesses.

This gives Google the luxury to run a thousand R&D experiments, and expose some of them to the public, with very little incremental cost after the initial development effort. Even if the experiment goes nowhere, it often generates enough ad revenues to justify the investment. But perhaps more significant, by becoming one of the players, Google develops a significantly better understanding of that particular niche. As a result, Google reduces the chance of missing the Next Big Thing; further it gives them the insight on how to monetize that particular domain with their core offering.

The conversion from cell-phones to smart-phones is still in an early phase which opens up opportunities for 2nd-tier hardware vendors to get a leg in. MacOS, and Linux have shown that even in a Windows world, other OSes' too can thrive. Android will never dominate the market; however it will find a place in open-source mobile OSes.

Google’s TAC, Revenues, and Headcount Signal Red Flags

Ashkhan:
I guess Google is in a no win situation. If TAC goes up, margins go down. If TAC goes down something is fishy. It all boils down to the spin you want to put on it.

When a new product is launched, the cost of sales and the sales commissions are high to encourage new members to sign up. As the product becomes established the sales commissions come down. Once Adsense was well established and has no worthwhile competition, Google could afford to pay less in commissions and that showed in the declining TAC expenses. However there is floor to what Google can go down to, and the slowdown in the rate of decline is an indication of that.

Further since TAC payouot is based on real clicks, it is likely that any quality improvement initiatives which alters the number of clicks vs the value of the click will impact it. As the revenue per click increases, Google may not pass on the revenue proportionally to the publishers.

Institutional Investors Still Don't 'Get' Google

Some thoughts:
1. Like Microsoft and desktop PCs before, Google does not want to be left out in anything major to do with the web. So if there is anything new (and there is a lot), Google wants to have a finger in the pie.

2. #1 does not imply that Google devotes a lot of resources to every new idea. A team of 2-3 efficient developers is often all that is needed to work on a new idea.

3. Google also does not have to spend a lot (if any) money on marketing new ideas; their primary expenditure is on development. Put the idea on the site, and let people try it out. If it catches on increase the resource allocation and the focus.

4. If the idea does not work, then at the least you have now built up internal expertise about that domain. If the flaw is with the implementation, and a competitor grows in the space, you go and buy them. Your internal project has significantly improved your ability to evaluate potential buy out candidates. If the idea itself is flawed (even the competitors are hurting), then you gradually wind the effort down, while having a presence in the space which can be revived if and when the idea catches the public fancy again.

BTW Lively looks cool, a possible precursor to Google sponsored role- playing games, especially role playing games which you can carry on your gPhone.

Google’s Earnings Expose Wall Street’s Limitations

Scott:

Thanks for your comment. I wanted to highlight how many on the street bought the bearish hypothesis, while ignoring obvious, public information which contradicted most of the basis of the bear case.

The magnitude of the change in Google's market cap right after the earnings illustrated the degree to which the Street was caught on the wrong foot. Clearly a lot of the analysts and the money managers who follow them, were well off the target. Clearly many got it right too. BTW, Google's results were almost inline with the original consensus estimate.


The article in Barron's, the pundits on TV, Blodget's blogs, all painted a picture of Google on life-support, when all the company did was sneeze. What really caught my attention during all the negativity were the jibes at the Google culture and the short-sighted attacks on their spending habits. I wrote a few articles during this period highlighting how the detractors were off-target, which are available on Seeking Alpha.

Microsoft Should Listen to Its Heart (and ignore the bean counters)

Folks:
Thank you for your comments.

1. When I said 'servers are linux' I meant non-Microsoft eco-system based servers which confirm to open standards (think Apache vs IIS). Exchange, Windows 2003 and other prop MS servers continue to operate in an MS based environment.

2. Web-Apps are now moving to a point where they do not require a persistent internet connection. They can save a version in a local cache and then sync it with the server when the device goes online.

3. Some of the comments from commercial IT workers, echo the comments which were made by mainframe managers 25 years ago. As workers start computing from a larger number of devices, the software cost for each device will become significant. At home I am reluctant to buy multiple licenses, one for every machine. This is also true in other small business environments which do not have site-licenses or dedicated IT staff.

4. Apple's move to Intel CPUs and subsequent support for Windows has certainly helped accelerate the adoption of Macs since it removes the one remaining reason not to get a Mac (i.e. how do I run legacy Windows software). However, to claim that people buy Macs to look cool and then run Windows is hard to accept. Though I do not yet own a Mac, it is likely that my next purchase will be one.

5. Bill Gates recently stated that the next Windows version will be released sooner than what everyone expected. Ballmer has let out hints that XP may live on longer than expected. Vista has been a disappointment and an illustration of how Windows/PC setup is becoming disconnected with the needs of the average user. I waste precious time responding to the same security messages and compatability warnings when using Vista. Instead of making the user experience seamless and intiutive, Vista forces the average user to worry about unproductive, tangential issues; issues which many of them have little capability of resolving except by pressing the OK/Continue button (which defeats the entire purpose of the warnings)

Google's EPS Beat Aided By Lower Than Expected Taxes

This is a result of the high tax rates in the US. As Google's international presence grows, the tax rate will continue to come down. This was the first quarter where international sales were greater than US sales. Since all the earlier data had indicated that US was slow while the rest of the world, especially Europe was strong, this was not surprising. Expect more analysts to realize that now and also scramble to figure out why they were so wrong.

Online Retail: Ready to Capture More Market Share

Hi Chris:

Thank you for your comments.

The focus of my article was on how search engine marketing is cost effective for online retailers. It is especially useful since often it leads to the acquisition of new customeres, at a cost comparable to what advertising to existing customers costs. Specifically I feel that Google has a lot to gain from its dominance in that space.

Brick and Mortar retailers will weather this downturn as all others before. The chains which are not well run or can not manage their inventory well will wither away. Retailers who offer a unique value proposition (e.g. An Apple Store, or Urban Outfitters) will prosper. Discount stores, especially warehouse stores will do well. General purpose department stores which do not offer anything unique will definitely suffer, especially those which compete with Walmart.

Over the longer term, B&M retailers will have to distinguish themselves and their offerings to survive. Online retailing will thrive because of the convinience it offers. Amazon now has a subscribe and save service where you can sign up for delivery of staples at regular intervals, and get a discount. So if you have kids and use a lot of diapers or formula, you can sign up to receive the products at your door-step at a 15% discount! B&Ms who count on consumer staples for a bulk of their earnings will have to evolve to compete in the non-perishable segment.

Is Google Bashing Finally Peaking?

Preston:
I was upset at Google since they had cancelled my Adsense account (which made about $100/year) last Fall. At that I had not started publishing regularly so the site was empty. So I thought let me use MS. But they results were so bad and cluttered that I was FORCED to go back to Google. So Google is serious about removing sites which they felt were not up to a level they want or not generating quality or quantity of clicks.

Alternative Energy:
Though is it true that any investment in alternative energy is going to take time Google is likely to reap a lot of benefits from it. Valley VCs have been investing a huge amount in alternative energy plays. If Google's investment arm had invested in a start-up no one would have even known about the money being spent but Wall Street raises such a hue and cry about 0.3% of 2007 revenues.

Is Google Bashing Finally Peaking?

Ram:
It is not just a question of whether Microsoft search does not use other metrics. It is a question of the end-user experience.

Type the stock ticker of say AAPL and the search result will show a link to the MSN page for Apple and then ask a question whether this was useful! Isn't it obvious? Is it a question worth asking? Master of the Obvious.

Buying Google, All the Way Down

Nice post especially about the port of advertiser behavior during a slowdown. In a slowdown revenues are more important than margins and the ad spending will focus on channels which result in short term revenues. And there is nothing like a paid search click when it comes to converting ad dollars to revenue. There is a reason why the keywords are being bid up. advertisers are not that stupid.

Blodget's Latest Google Attack: Much Ado About Nothing

This is a trading suggestion with limited downside (cost of option) and substantial upside even if Google makes a 4-5% move upwards to retrace the losses the stock took onTuesday.

Wednesday's action was encouraging; the stock held support around the next support level ($500.92, approximately $500). It then traded between $505 and the next resistance level ($508.58) before closing above that level.

The overall market action was bullish on Wednesday; there was volume on the upside and the market digested a lot of bad news without giving up the gains. The need to test the January bottom is being talked about less as stocks rally on bad news.

Google is focussed on increasing the value proposition of their advertisement offering. This has and will continue to result in higher bids for their ads. Even if the total click count takes a hit, the total revenues will not. As the industry consolidates, increasing the quality and effectiveness of their offering will separate Google from the competition.

A few months ago, the stock traded almost 47% higher than its close on Wednesday. From a fundamental point of view, little has changed to justify the extent of the pullback. The stock is ready for a short-term bounce.

Google Warns that Reducing “Accidental Clicks” Could Hurt Revenue

Blodget has already clarified that the only sentence added in the 10K is:
"In addition, we may continue to take steps to reduce the number of accidental clicks."

www.alleyinsider.com/2...

Much Ado about Nothing.