Folks, there's a firm new bearish argument for Google
(NASDAQ:GOOG), and that is the pending rollout of Google Fiber.
Now I could point out that every "big bear attack" on Google spending too much money has been proven wrong -- YouTube, Android, Motorola, smartphones production, Gmail, and heck, for that matter, starting the company to go after Internet search when the industry leaders had essentially quit innovating and investing in search.
But let me just focus on the current bear arguments against Google Fiber and attack them head-on:
1. Google Fiber is going to cost too much money.
2. There is no money/margin in offering high-speed connectivity.
3. There is too much competition.
4. It doesn't mesh with Google's push to mobility.
Ok, I've seen all these and find most of them laughable. But here are my responses to each.
1. Google Fiber will cost a lot of money, but Google can easily fund it, and has a very smart deployment strategy. Google, in my view, is attacking this market because prices for fiber deployments have declined massively over the last decade.
2. Now this one really is laughable. Anyone paying a cable, Internet, or mobile bill can attest that there is plenty of money being paid to the current vendors. Also, any rational view of the the financials of companies such as Verizon
(NASDAQ:CMCSA), and AT&T
(NYSE:T), shows that the companies are cash generating machines. Moreover, Google has more ways to monetize the asset than many other competitors in this area.
3. I totally disagree with the competition argument. I think there is now too little competition vs. far too many competitors during the CLEC (competitive local exchange carrier) era of the late 1990s and early 2000s. This is part and parcel of why deploying Google Fiber is brilliant. In fact, this is exactly what Microsoft
(NASDAQ:MSFT) should have done when it was thinking about this idea a few years ago and buying into the cable companies.
Thus, we now have an environment where consumers are "hungry" for a viable competitor and will greedily seek out Google Fiber services where and when they are available.
4. Anyone saying that Google Fiber doesn't fit into the company's vision and long-term strategy simply doesn't know Google. This fits nearly perfectly into what Google is and what Google wants to become. The more ways the company has to create viable and desirable business uses of the company's growing list of valuable services, the better. Google would love nothing more than for people to be using Google software with a Google device, utilizing Google's vast array of services over a WiFi connection with the data passing into Google's massive data storage centers -- all of which would be riding over, through, and around the Google Fiber network.
Simply put: Game, set, and match for Google Fiber.
Apple Might Be the Bigger Loser in the Apple-Samsung Breakup
Facebook Home Is Brilliant, While Presenting Interesting Questions for Google Android
My Apple iMac Is Starting to Look Like a Toaster
Sean Udall is the author of the TechStrat Report, a tech focused newsletter. The following is a free sample. Take a free trial!
Positions in GOOG and MSFT
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.