GOOGL - Google

[VAL9000]

1, iPad mini cannibalizes the iPad, not the iPhone which is Apple's biggest product. Mobile cannibalizes desktop search which is still Google's biest product by far. Take a look at PC sales numbers. Over time, there will be no dekstop searches.

That's going to be tough for you given that you claim you only ever search on your desktop...  I guess you will be the last hold-out.

 

Actually, cannibalization doesn't even matter.  Google's recent changes to their search advertising system have grouped tablets and desktops together.  Even as desktops are replaced by tablets, the economics for this segment will continue to default to today's desktop CPCs.

 

If you're saying that mobile is cannibalizing desktop + tablet, then I say show me the data.

 

2, iPad has growing software revenue which is on top of the hardware revenue. There is no such equivalent for Google.

Is Google Play not an equivalent?  It's nascent, but it's the same thing as the App Store, no?  What about Google Apps for Business?  Kind of like iCloud.

[Palantir]

How much are you guys valuing GOOG at? I say it gives you a 10% return below $850.

[VAL9000]

How much are you guys valuing GOOG at? I say it gives you a 10% return below $850.

 

About the same - about a trillion dollar market cap between now and 15 years from now.

[jeffmori7]

How much are you guys valuing GOOG at? I say it gives you a 10% return below $850.

 

About the same - about a trillion dollar market cap between now and 15 years from now.

 

With a 10% growth perspective long term, a quite high PE valuation lately, does it worth keeping it considering the technological risk? I am considering selling it.

[Palantir]

What P/E do you think is more appropriate? (serious q)

 

Take note of the 47B in cash btw.

[premfan]

What P/E do you think is more appropriate? (serious q)

 

Take note of the 47B in cash btw.

 

I wouldn't value mature tech companies using p/e as your main indicator. Mature tech companies would be better valued using a multiple to their owners earnings.  If you value mature ( aka sustainable) tech companies using p/e it would require a lower multiple due to the nature of the industry. Example a sustainable established global brand like jnj would have a higher multiple than a sustainable tech company like a IBM.  Tech companies are notorious for being horrible capital allocators so the cash on the balance sheet doesn't mean a lot in valuing the company. Cash on the balance sheet is useful in situations when the tech company is collapsing like an apple now or a rim last year. Buying the company when the market cap is close to 50 percent liquid is usually a smart bet.

 

 

[jeffmori7]

Premfan, not sure to understand your owners earning in tech companies?

 

Palantir, it's just that I find that a multiple over 20 for a company becoming more a stable blue chip is high, but not astronomical as well. but compared to the rest of my investments, I could maybe use this well ( a little highly valued) stock to flip to cheaper stocks.

 

How do you value Google today? I see it as trading for about 20x ex-cash, growing at 10-15%. I'm not that much worried by the valuation than I want to take advantage of the rapid valuation expansion.

 

 

[Palantir]

Premfan, not sure to understand your owners earning in tech companies?

 

Palantir, it's just that I find that a multiple over 20 for a company becoming more a stable blue chip is high, but not astronomical as well. but compared to the rest of my investments, I could maybe use this well ( a little highly valued) stock to flip to cheaper stocks.

 

How do you value Google today? I see it as trading for about 20x ex-cash, growing at 10-15%. I'm not that much worried by the valuation than I want to take advantage of the rapid valuation expansion.

 

I think if you discount the cash by 35% (tax), we get an enterprise value of 246, and I prefer to use FCFE instead of NI, so you get a EV/FCFE = 18.9. This is certainly on the high side. But it comes back to what you expect for growth.

 

I think an EV/FCFE of a little more than 20 is fair (but not cheap) for a firm that is growing FCFE at 10%. Obviously if GOOG doesn't actually grow at that rate, we have a problem.

 

EDIT: Just for clarification, I assume the long term growth rate for equities is 9%, and so if that is my expected cash flow return for an investment, I think that it is trading at its intrinsic value. I suppose this is not a traditional analysis, but how I think of it.

[Guest valueInv]

This is a great feature, if it works:

 

http://www.informationweek.com/mobility/smart-phones/samsung-galaxy-s-iv-new-feature-details/240150123

[racemize]

This is a great feature, if it works:

 

http://www.informationweek.com/mobility/smart-phones/samsung-galaxy-s-iv-new-feature-details/240150123

 

The smart scroll has to be carefully done.  I could see getting really annoyed with my screen moving text while I'm reading.

[Guest valueInv]

How long will they stay in the smartphone market?

 

http://venturebeat.com/2013/03/06/htc-february-sales/

 

Pity, their new device seems pretty good in comparison to the Galaxy III.

[Guest wellmont]

How long will they stay in the smartphone market?

 

http://venturebeat.com/2013/03/06/htc-february-sales/

 

Pity, their new device seems pretty good in comparison to the Galaxy III.

 

i think msft could buy them and shift them over to windows phones. msft has a longstanding relationship with them.

[Palantir]

I wish I'd bought more, although I invested 10% of my portfolio at the time in it.  :-[

[Guest valueInv]

The Android patent scorecard:

 

http://www.fosspatents.com/2012/10/updated-lists-of-android-patent.html

 

Where art thou, Motorola patents?

[txlaw]

I'm surprised nobody has posted about Andy Rubin stepping down as head of Android and Sundar Pichai, head of Chrome and ChromeOS, stepping up to take Rubin's place.

 

That suggests that Android and Chrome will be converging sooner than thought, which will be a very, very interesting development in the OS wars.

[jeffmori7]

Good point txlaw!

 

And there is no indication about what will Rubin do in the future?

[Guest valueInv]

Samsung is turning the tables on Google:

 

http://techcrunch.com/2013/03/15/the-samsung-galaxy-s-4-and-its-de-googling-of-android-suggests-we-might-see-a-split/

 

I remember people posting about how Android allows Google to control the end point.

 

The way things are going, probably not.

[txlaw]

Samsung is turning the tables on Google:

 

http://techcrunch.com/2013/03/15/the-samsung-galaxy-s-4-and-its-de-googling-of-android-suggests-we-might-see-a-split/

 

I remember people posting about how Android allows Google to control the end point.

 

The way things are going, probably not.

 

No, most people said that Android prevented others, like AAPL and MSFT, from controlling the end user experience wrt Google software and services.

[txlaw]

Samsung is turning the tables on Google:

 

http://techcrunch.com/2013/03/15/the-samsung-galaxy-s-4-and-its-de-googling-of-android-suggests-we-might-see-a-split/

 

I remember people posting about how Android allows Google to control the end point.

 

The way things are going, probably not.

 

No, most people said that Android prevented others, like AAPL and MSFT, from controlling the end user experience wrt Google software and services.

 

In other words, Android was always a defensive move that has protected revenue that GOOG is currently making from having been funneled to a MSFT or AAPL.

[Guest valueInv]

Samsung is turning the tables on Google:

 

http://techcrunch.com/2013/03/15/the-samsung-galaxy-s-4-and-its-de-googling-of-android-suggests-we-might-see-a-split/

 

I remember people posting about how Android allows Google to control the end point.

 

The way things are going, probably not.

 

No, most people said that Android prevented others, like AAPL and MSFT, from controlling the end user experience wrt Google software and services.

 

Spoken like a true lawyer.  ;D ;D ;D

 

Check back the posts.

 

So they prevented Appl and MSFt from controlling the user experience but handed control in a platter to Samsung?

[Ross812]

Samsung is turning the tables on Google:

 

http://techcrunch.com/2013/03/15/the-samsung-galaxy-s-4-and-its-de-googling-of-android-suggests-we-might-see-a-split/

 

I remember people posting about how Android allows Google to control the end point.

 

The way things are going, probably not.

 

The article was extrapolated from this:

 

Samsung did something fairly surprising given that it included the most recent version of Android, 4.2.2, on its brand new Galaxy S 4 smartphone: it didn’t talk about that much at all last night at the special launch event. Maybe the company was too busy trying to cram as many song and dance numbers into the show as possible, but maybe that’s because Samsung will soon take what it needs from Android and go its own way.

 

Please check your sources. Read some of the comments to your linked article.

 

http://officialandroid.blogspot.com.au/2012/09/the-benefits-importance-of-compatibility.html

 

We built Android to be an open source mobile platform freely available to anyone wishing to use it. In 2008, Android was released under the Apache open source license and we continue to develop and innovate the platform under the same open source license -- it is available to everyone at: http://source.android.com. This openness allows device manufacturers to customize Android and enable new user experiences, driving innovation and consumer choice.

 

As the lead developer and shepherd of the open platform, we realize that we have a responsibility to app developers -- those who invested in the platform by adopting it and building applications specifically for Android. These developers each contribute to making the platform better -- because when developers support a platform with their applications, the platform becomes better and more attractive to consumers. As more developers build great apps for Android, more consumers are likely to buy Android devices because of the availability of great software content (app titles like Fruit Ninja or Google Maps). As more delighted consumers adopt Android phones and tablets, it creates a larger audience for app developers to sell more apps. The result is a strategy that is good for developers (they sell more apps), good for device manufacturers (they sell more devices) and good for consumers (they get more features and innovation).

 

In biological terms, this is sometimes referred to as an ecosystem. In economic terms, this is known as a virtuous cycle -- a set of events that reinforces itself through a feedback loop. Each iteration of the cycle positively reinforces the previous one. These cycles will continue in the direction of their momentum until an external factor intervenes and breaks the cycle.

 

When we first contemplated Android and formed the Open Handset Alliance, we wanted to create an open virtuous cycle where all members of the ecosystem would benefit. We thought hard about what types of external factors could intervene to weaken the ecosystem as a whole. One important external factor we knew could do this was incompatibilities between implementations of Android. Let me explain:

 

Imagine a hypothetical situation where the platform on each phone sold was just a little bit different. Different enough where Google Maps would run normally on one phone but run terribly slow on another. Let's say, for sake of example, that Android implemented an API that put the phone to sleep for a fraction of a second to conserve battery life when nothing was moving on the screen. The API prototype for such a function might look like SystemClock.sleep(millis) where the parameter "millis" is the number of milliseconds to put the device to sleep for.

 

If one phone manufacturer implemented SystemClock.sleep() incorrectly, and interpreted the parameter as Seconds instead of Milliseconds, the phone would be put to sleep a thousand times longer than intended! This manufacturer’s phone would have a terrible time running Google Maps. If apps don’t run well across devices due to incompatibilities, consumers would leave the ecosystem, followed by developers. The end of the virtuous cycle.

 

We have never believed in a “one size fits all” strategy, so we found a way to enable differentiation for device manufactures while protecting developers and consumers from incompatibilities by offering a free "compatibility test suite" (CTS). CTS is a set of software tools that tests and exercises the platform to make sure that (for example) SystemClock.sleep(millis) actually puts the device to sleep for only milliseconds. Like Android, the test suite is freely available to everyone under the Apache open source license: http://source.android.com/compatibility/cts-intro.html

 

While Android remains free for anyone to use as they would like, only Android compatible devices benefit from the full Android ecosystem. By joining the Open Handset Alliance, each member contributes to and builds one Android platform -- not a bunch of incompatible versions. We’re grateful to the over 85 Open Handset Alliance members who have helped us build the Android ecosystem and continue to drive innovation at an incredible pace. Thanks to their support the Android ecosystem now has over 500 million Android-compatible devices and counting!

Posted by Andy Rubin, Senior Vice President of Mobile and Digital Content

 

Google has already stopped such forks before:

 

http://www.androidauthority.com/google-speaks-up-on-the-aceralibaba-affair-115229/

 

Btw, Amazon was never an OHA member.

[txlaw]

Samsung is turning the tables on Google:

 

http://techcrunch.com/2013/03/15/the-samsung-galaxy-s-4-and-its-de-googling-of-android-suggests-we-might-see-a-split/

 

I remember people posting about how Android allows Google to control the end point.

 

The way things are going, probably not.

 

No, most people said that Android prevented others, like AAPL and MSFT, from controlling the end user experience wrt Google software and services.

 

Spoken like a true lawyer.  ;D ;D ;D

 

Check back the posts.

 

So they prevented Appl and MSFt from controlling the user experience but handed control in a platter to Samsung?

 

Actually, you should check back.  You probably won't do that, of course. 

 

GOOG prevented MSFT and AAPL from exerting control, thereby protecting themselves from getting replaced by competing MSFT- or AAPL- software and services. 

 

Samsung doesn't have "control" over anything.  Do you really think that?  If so . . .

[Guest valueInv]

Samsung is turning the tables on Google:

 

http://techcrunch.com/2013/03/15/the-samsung-galaxy-s-4-and-its-de-googling-of-android-suggests-we-might-see-a-split/

 

I remember people posting about how Android allows Google to control the end point.

 

The way things are going, probably not.

 

The article was extrapolated from this:

 

Samsung did something fairly surprising given that it included the most recent version of Android, 4.2.2, on its brand new Galaxy S 4 smartphone: it didn’t talk about that much at all last night at the special launch event. Maybe the company was too busy trying to cram as many song and dance numbers into the show as possible, but maybe that’s because Samsung will soon take what it needs from Android and go its own way.

 

Please check your sources. Read some of the comments to your linked article.

 

http://officialandroid.blogspot.com.au/2012/09/the-benefits-importance-of-compatibility.html

 

We built Android to be an open source mobile platform freely available to anyone wishing to use it. In 2008, Android was released under the Apache open source license and we continue to develop and innovate the platform under the same open source license -- it is available to everyone at: http://source.android.com. This openness allows device manufacturers to customize Android and enable new user experiences, driving innovation and consumer choice.

 

As the lead developer and shepherd of the open platform, we realize that we have a responsibility to app developers -- those who invested in the platform by adopting it and building applications specifically for Android. These developers each contribute to making the platform better -- because when developers support a platform with their applications, the platform becomes better and more attractive to consumers. As more developers build great apps for Android, more consumers are likely to buy Android devices because of the availability of great software content (app titles like Fruit Ninja or Google Maps). As more delighted consumers adopt Android phones and tablets, it creates a larger audience for app developers to sell more apps. The result is a strategy that is good for developers (they sell more apps), good for device manufacturers (they sell more devices) and good for consumers (they get more features and innovation).

 

In biological terms, this is sometimes referred to as an ecosystem. In economic terms, this is known as a virtuous cycle -- a set of events that reinforces itself through a feedback loop. Each iteration of the cycle positively reinforces the previous one. These cycles will continue in the direction of their momentum until an external factor intervenes and breaks the cycle.

 

When we first contemplated Android and formed the Open Handset Alliance, we wanted to create an open virtuous cycle where all members of the ecosystem would benefit. We thought hard about what types of external factors could intervene to weaken the ecosystem as a whole. One important external factor we knew could do this was incompatibilities between implementations of Android. Let me explain:

 

Imagine a hypothetical situation where the platform on each phone sold was just a little bit different. Different enough where Google Maps would run normally on one phone but run terribly slow on another. Let's say, for sake of example, that Android implemented an API that put the phone to sleep for a fraction of a second to conserve battery life when nothing was moving on the screen. The API prototype for such a function might look like SystemClock.sleep(millis) where the parameter "millis" is the number of milliseconds to put the device to sleep for.

 

If one phone manufacturer implemented SystemClock.sleep() incorrectly, and interpreted the parameter as Seconds instead of Milliseconds, the phone would be put to sleep a thousand times longer than intended! This manufacturer’s phone would have a terrible time running Google Maps. If apps don’t run well across devices due to incompatibilities, consumers would leave the ecosystem, followed by developers. The end of the virtuous cycle.

 

We have never believed in a “one size fits all” strategy, so we found a way to enable differentiation for device manufactures while protecting developers and consumers from incompatibilities by offering a free "compatibility test suite" (CTS). CTS is a set of software tools that tests and exercises the platform to make sure that (for example) SystemClock.sleep(millis) actually puts the device to sleep for only milliseconds. Like Android, the test suite is freely available to everyone under the Apache open source license: http://source.android.com/compatibility/cts-intro.html

 

While Android remains free for anyone to use as they would like, only Android compatible devices benefit from the full Android ecosystem. By joining the Open Handset Alliance, each member contributes to and builds one Android platform -- not a bunch of incompatible versions. We’re grateful to the over 85 Open Handset Alliance members who have helped us build the Android ecosystem and continue to drive innovation at an incredible pace. Thanks to their support the Android ecosystem now has over 500 million Android-compatible devices and counting!

Posted by Andy Rubin, Senior Vice President of Mobile and Digital Content

 

Google has already stopped such forks before:

 

http://www.androidauthority.com/google-speaks-up-on-the-aceralibaba-affair-115229/

 

Btw, Amazon was never an OHA member.

We're talking about user experience, not the core OS. TouchWiz, Samsung Hub, S Voice, S Message, Samsung's Passbook Clone, S Health, etc.

[Guest valueInv]

Actually, you should check back.  You probably won't do that, of course. 

 

GOOG prevented MSFT and AAPL from exerting control, thereby protecting themselves from getting replaced by competing MSFT- or AAPL- software and services. 

 

Samsung doesn't have "control" over anything.  Do you really think that?  If so . . .

 

Posted just recently:

 

 

Note that I still think Google is a great company, I just wonder if they should focus more on search and advertising.

 

Here's my take.  GOOG's core business is to provide search, AI, and augmented reality, and to monetize those services through the data it gathers (whether by advertising or otherwise). 

 

One major point of attack against GOOG is to control the OS layer between the end user and Google services.  Therefore, GOOG provides Android and ChromeOS.  Also, the more people are using the Web, the better GOOG does because they get a greater share of a person's time. 

 

And we haven't even gone into their other services (e.g., YouTube, Docs, IaaS, and PaaS) that benefit from having these GOOG-produced platforms.  So to me, it makes a lot of sense what GOOG is doing.  It's all about growing the business, expanding the moat, and at the same time pushing the boundaries of technology and advancing the civilization.

 

Amazon and FB are Google's biggest threats. Google has made a strategic blunder by focusing its efforts on fight Apple instead of its actual threats.

 

Well that I'm not sure of..  I don't know that Google was fighting Apple with Android per se.  they were, but taht's cause Apple was there first.  I think they were probably fighting the inevitable rise of the post Pc world and mobile etc, and it was in their best interest to control or go after that market.  They were fighting to be there in scale before MSFT, RIMM, NOK and Samsung got their act together.  Now they basically own a large part of mobile search just by being there second and being the most ubiquitous OS.  i would say that was a very important strategic move.  Chrome browser too.  They are extending their moat by being the default search in all these devices and browsers.  Kind of how MSFT was trying to fortify their moat by shipping IE by default with Windows.  They are definitely still fighting FB with google+ (which is more than just the social network), and Amazon on the web services and search front.  It's definitely a multi front war..  But Amazon has the advantage that they like small margins, huge scale and no profits for years to come...

 

There's plenty more. Just do a search on this thread.

[txlaw]

Actually, you should check back.  You probably won't do that, of course. 

 

GOOG prevented MSFT and AAPL from exerting control, thereby protecting themselves from getting replaced by competing MSFT- or AAPL- software and services. 

 

Samsung doesn't have "control" over anything.  Do you really think that?  If so . . .

 

Posted just recently:

 

 

Note that I still think Google is a great company, I just wonder if they should focus more on search and advertising.

 

Here's my take.  GOOG's core business is to provide search, AI, and augmented reality, and to monetize those services through the data it gathers (whether by advertising or otherwise). 

 

One major point of attack against GOOG is to control the OS layer between the end user and Google services.  Therefore, GOOG provides Android and ChromeOS.  Also, the more people are using the Web, the better GOOG does because they get a greater share of a person's time. 

 

And we haven't even gone into their other services (e.g., YouTube, Docs, IaaS, and PaaS) that benefit from having these GOOG-produced platforms.  So to me, it makes a lot of sense what GOOG is doing.  It's all about growing the business, expanding the moat, and at the same time pushing the boundaries of technology and advancing the civilization.

 

Amazon and FB are Google's biggest threats. Google has made a strategic blunder by focusing its efforts on fight Apple instead of its actual threats.

 

Well that I'm not sure of..  I don't know that Google was fighting Apple with Android per se.  they were, but taht's cause Apple was there first.  I think they were probably fighting the inevitable rise of the post Pc world and mobile etc, and it was in their best interest to control or go after that market.  They were fighting to be there in scale before MSFT, RIMM, NOK and Samsung got their act together.  Now they basically own a large part of mobile search just by being there second and being the most ubiquitous OS.  i would say that was a very important strategic move.  Chrome browser too.  They are extending their moat by being the default search in all these devices and browsers.  Kind of how MSFT was trying to fortify their moat by shipping IE by default with Windows.  They are definitely still fighting FB with google+ (which is more than just the social network), and Amazon on the web services and search front.  It's definitely a multi front war..  But Amazon has the advantage that they like small margins, huge scale and no profits for years to come...

 

There's plenty more. Just do a search on this thread.

 

Not sure why you would quote my previous post, as it proves my point . . .

 

From the post you just quoted:

 

One major point of attack against GOOG is to control the OS layer between the end user and Google services.  Therefore, GOOG provides Android and ChromeOS.