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Google - It's Working and I Am Not Surprised
March 14, 2013 03:00 PM
The following is a sample report of Sean's
that was written on March 13, 2013
I'm writing this bullet point piece as a semi-serious piece to the power of the
) as well as one of the primary benefits of the TechStrat service -- Tech Sector foresight. As with GOOG, the stock is moving (and has moved) for nearly all the key reasons I was highlighting in prior quarters and in some cases years.
The one thing I do try to do is prepare folks for the why of the future potential moves. This is not a game of perfect, but it is a game where the better prepared & informed generally crush those who are reacting late to a "stock situation". .
So why is GOOG moving to new highs? And what did I say well ahead of time? And how counter was the argument for each when the stock was much more negative?
. When Android share was 3% I clearly stated numerous times that Android would surpass iOS share. Then a year later when Android was pushing 15% I stated I would not be surprised to see 70% plus share and I reiterated that GOOG would make huge amounts of money from Android and mobile search.
The counter was 180 degrees wrong: All this has happened and all that while so called experts were saying that Google would never make money on Android, litigation would kill the platform, and in no way would Android surpass iOS. To all this, all I can say is -- Game set and match.
2. Migration from Desktop to Mobile search
. Again, nearly two years ago I said one of the best reasons to own GOOG was that as some point they would make more money from Mobile search than Desktop and that the migration would be a positive vs. a negative. This is clearly underway and again Android proliferation is a big key to it. But Android isn't the only reason. Really any Mobile OS features a slew of GOOG App's which are far and away the most popular -- Chrome, Maps, Gmail etc... and iOS is a huge boon for GOOG in migration from desktop to mobile search revenue.
The counter again, 180 degrees wrong: While this might have been a bit less clear as the GOOG naysayers (nearly all are positive now) were talking non-stop about the decline in CPC rates, even as CPC growth was soaring. They also stated (over and over) that the migration from desktop could permanently impair the company and/or was it's greatest risk. They also talked about Siri being a huge threat, even as it was (and is) largely powered by GOOG search and while GOOG Voice functions were as good if not better.
. I'll keep this one short and sweet. But suffice to say that when I was on the FOX news after hours program (circa 2007), I highlighted the power of YouTube for GOOG and stated it was the possibly the best acquisition by any Tech company. And I can't totally recall, but I may have added for all time.
The counter, pure idiocy: The bears again used that old line, "GOOG will never make money, they give it away". Again, how simply stupid, as YouTube is now generating hugely more in annual revenue than the 2006 purchase price of $1.8B.
4. Motorola deal:
This was perhaps the most controversial move by the company and still possibly sees the most negative chatter. Though the deal metrics and advantages are starting to finally be noticed. This was again something I cited as a "genius" move by GOOG the day it was announced. I saw what I called a very cheap price to pay for all those patents, net cash and engineering talent. I also highlighted future product release synergies etc... but at the time I focused on the deal price and what I felt was the best patent portfolio on the planet in mobility save
The counter still remains largely negative: The negatives on this deal were and are the "hit on margins" to core GOOG. However, they never cite the patent position that the company finds itself in which went from "just ok" to possibly a near global leadership position. Many believe we won't see great products. To this I say they have totally ignored how good the Razr lineup is. They also ignore the future release of the Moto X (Nexus) phones which will likely become the class of the high-end Android lineup.
In summary, I could add a few more, not the least of which is core search which many said App's would make much less used, vs. my view which was/is that App's increase total search volume. Bottom line, I think the GOOG train is going to keep running very strongly. At this exact moment I'm not a buyer of the name, but I will be on future price corrections (either market based or Google itself). And while many are just nudging price targets 10-20% above the current price, I think we will see a period where these fall very short on a longer term horizon. The GOOG remains my favorite long-term name.
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by Sean Udall. Sean provides in-depth analysis, strategies and trades across the technology sector.
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