Filed under: Major movement, International markets, Forecasts, Blogs, Competitive strategy, Google (GOOG), Microsoft (MSFT), Yahoo! (YHOO), Stocks to Buy
With Microsoft Corporation (NASDAQ: MSFT) bidding $44.5 billion for Yahoo, Inc. (NASDAQ: YHOO) one would instantly think that Microsoft is the winner — and they could be — in about a year or so… maybe. In the meantime, Google Inc. (NASDAQ: GOOG) will benefit immediately. The deck chairs are being re-arranged and there will be one less player. But before everyone thinks Microsoft is going to walk away the big winner, think again.
The game changer right now is Google. With 76% search engine market share, it will still be 4X the size of Microsoft after the Yahoo transaction is closed. Google has been successfully expanding its presence globally, and not in just the usual countries, but in the Brazils, the Portugals, the Argentina’s, the Australias, etc. Seeding these remote, but lucrative locations is done and Google is now reaping the rewards.
Google can now capitalize domestically with its customers and Yahoo’s/ Microsoft’s customers as well by playing the disruption card. Basically, when a technology company is about to be acquired a lot of potentially negative things can and do happen: employees and customer relationships are disrupted. Google can unequivocally claim to customers that they are indeed “the” priority right now and that smooth media/advertising projects are awaiting their approval. Yahoo/Microsoft aren’t sure which players are staying or leaving yet. Customers don’t like that!!
Google can also emphasize that a disjointed headquarters status of Seattle or Sunnyvale can also lead to confusion and levels of customer service declining. Google has to take its game up a notch in the next 12 months and capture even more share.
Google’s quarter was viewed by many as a disappointment. It’s a buying opportunity the same as we witnessed from last July. Google reported a “disappointing” June 30th, 2007 quarter, saw its stock fall from $550 to $500, to only rebound and soar up to $747. That same opportunity is staring us in the face again. Remember, this company does not give earnings or revenue guidance to the Street. The so-called disappointment was solely in the eyes of analysts. I estimate Google will earn $20 per share in 2008, up from $15.58 in 2007.
Has the industry growth rate slowed down? Perhaps, but only temporarily in the United States. The analogy I would use is the Boston Red Sox won 96 games to win the Major League Baseball Eastern Division in 2007. It may only take 94 wins in 2008, but still win the division. In 2009, it make take 98 games, but still, they are the winner. Google dominates its sector without question and it will grow faster than the industry or any major competitor. Bottom line is whatever slowdown there may be…it’s in the price!! Google should double in the next two years in value.
Google’s overseas revenues are still under 50% of total revenues, yet international growth is 80%+. Also, Google may expand its incredible market dominance as it bids for the “airspace” from the FTC. This new line for Google would be complimentary to its core search engine and advertising business.
So yes, Microhoo or Yasoft will be the clear number 2 player, but Google has a 12 month window to accelerate its position and its terrific profitability. Google has a game changing situation right here, right now.
Georges Yared writes about finding great growth stocks today in GameOn Investing.
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