Anand Krishnaswamy

Open Your Eyes to Google's Structural Crisis

Your argument against GOOG seems to be based on the fact that content owners are going to go after GOOG and that leads to the downfall of the company, if Ive understood correctly. GOOG is well aware of the problems that come with peddling 3rd party content.

1) Firstly, note that GOOG has tools that "catch" users that post copyrighted content "red-handed".

2) Secondly, there could be two types of content owners in broad terms:

a) Big Companies with a huge volume of content that is constantly being released to the market
b) (Much) Smaller companies that release content from time to time, and have relatively lesser financial strength

As for the bigger companies, since they have the strength to do so, they have an incentive to sue GOOG. However, in such a scenario, GOOG execs will likely negotiate agreements that allow GOOG to pay royalties of some sort, that will keep the few big players at bay.

For the smaller companies, they do not have the incentive nor the financial power to fight against the likes of GOOG. Sure, a class action lawsuit is possible, however, the cost of organizing all such providers will be huge. Even if that happens, and the ruling goes against GOOG in court, they will likely be ordered to pay $X Hundred Million dollars, which is a pittance considering GOOG has $13B in the bank.

3) Your argument that GOOG does not have real products and is making money "solely on the backs of other people's content" is flawed. What about Gmail, Google Apps etc? Do you know how many small business hate having to pay hundreds for MSFT's bundled software packages, and how many of them would migrate to Google Apps?

Lastly, notice WHO is making that statement "...solely on the backs of other people's content...". Not surprisingly, it is "Rubin" from Microsoft.

I dont know about you, but frankly, I did not expect any one else to have made that comment but a MSFT exec.

Thanks
Anand

Down Market Was Predicted

Faisal

What do you consider as the positives for NYX besides the fact that it is touted as "Cramer Stock of the Year 2007"? Do you have an entry/exit point and a time horizon for NYX ?

Google: A Year After The Wall St. Journal's Cover Story

Sounds like Multiple compression is happening for GOOG, even though the company continues chugging on with its new product development. Where do you expect the long term equilibrium P/E multiple for GOOG given it is capable of growing earnings at 20-25% in the long run?

Is there a prefered entry point, if so why?

A Close Look At Google's Earnings

Yaser,

Your response suggests that they DO have lots of opportunities to invest their capital. I dont disagree on that point, but am cautiously optimistic - ie wait and watch.

Also your 28ish PE for GOOG means it will earn 480/28=approx $17 this year? Is that your estimate? How do you arrive at that number? Just wanted to pick your brain on the rationale.

Thanks and keep em articles coming!
-Anand

NYSE Group Posts Impressive Earnings - But Where's the Long-Term Value?

Mike,

I totally agree with you. Being ABLE to do something is one thing, while actually DOING it is another.
Plus, the barriers to entry in this field are high. I agree with George in that at some point, if all the exchanges in the world were to operate seamlessly on a 24 hour platform and that a large % of trading is automated, then this becomes a yield play since there is not much growth to be had.

However, how long is it going to take to get to that point? Until then, in the next 3-5 years, the excesses would be shed out of trading (did you see the empty floors at the NYSE?), and technology would replace humans for faster execution which translates directly into more transactions. Further, job cuts decrease costs, a part of which could be plowed back into technology. Both of these add to the bottom line, and hence the expected growth in the next 3-5 years. Plus, if you add acquisitions of foreign exchanges such as Tokyo, India etc, that itself is a revenue stream, further contributing to EPS growth.

In summary, EPS growth will be derived from several vectors:

Cost cutting (Job cuts etc)
Technology to increase execution speed => more transactions
New Products (ETFs etc)
Acquisitions/Strategic Partnerships with Worldwide exchanges

This is a 3-5 year play on the globalization of finance. The only question is: Will John Thain continue to execute?

Thanks
Anand

A Close Look At Google's Earnings

Yaser,

What is your response to the bear case on Google in the long term (>=5 years).

Company is already $150B in market cap
Organic Growth cannot continue at this torrid pace. (Sure everyone agrees on this one, even the bulls)
Management refuses to issue dividends or buyback shares (This is the most concerning)

All of these could lead to a P/E contraction in GOOG in the long run, since eventually, growth will slow.

Granted, these are some of the smartest brains in the planet, but their refusal to buyback shares/issue dividends/split the shares is concerning.

Thoughts?

Anand

PS: In spite of these concerns, I still continue to hold GOOG.

Assessing The Clean Energy ETF

Brett, Interesting article. When looking at the correlation, what did you run the correlation against, the closing prices of the corresponding assets, or n-day returns?

Thanks
Anand