Google Shares Well Short of All-Time High

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The stock prices of Apple Inc. (NASDAQ: AAPL) and Amazon.com Inc. (NASDAQ: AMZN) reach all-time highs almost every day. The third member of the club of tech companies that is often mentioned as among the most important and powerful in the world is Google Inc. (NASDAQ: GOOG). Its share price remains well below its all-time high of $747, reached in 2007 before that recession-driven stock market crash. The price, which is currently $681, suggests that Wall St. believes that Google has weaknesses beyond those of the other two companies.

Further proof of the market’s skepticism about Google is the state of its shares this year. Google’s stock has risen only 5% in 2012. Amazon’s has moved 42% higher, while Apple’s is higher by 64%.

Pessimists about Apple’s prospects routinely point to competition from a slew of companies led by Samsung. That worry has been blunted by a recent court decision about Apple’s patents. Apple has been attacked also for its tardiness in releasing the iPhone 5. That delay has frozen the company out of the 4G market. Critics also point to Apple’s market share problems in China. All of those negative impressions continue to be overwhelmed by Apple’s growth and innovation, as well as its uncanny ability to release its products at times when consumers are ripe to buy them.

The case against Amazon’s share price improvement is even more powerful than the one against Apple. Amazon has extremely low profit margins. CEO and founder Jeff Bezos continues to spend a fortune on marketing. Amazon does not make enough money on its Kindle line of hardware. But Amazon has reached the point where it cannot be challenged as the leader of the e-commerce industry. Its e-book business is believed to be wildly profitable. And Amazon has created the world’s largest cloud platform for companies that want to outsource server, storage and bandwidth functions.

Google’s weaknesses become more troubling as it reports results each quarter. Its growth rate has slowed considerably, and it has run out of the ability to expand in its primary markets of the United States and Europe — it simply has too much of the market in these regions. The nations in which Google needs to have a big presence — India, Russia and China — have local search companies that dominate the sector.

Google’s other Achilles’ heel is Android, which appears on the surface to be a great success. Actually, since Google has been unable to demonstrate it can derive much revenue from the mobile operating system, Wall St. continues to view the company as nothing more than the world’s most successful search company. And, with Apple’s patent victory over Samsung, many legal experts believe its next target will be Google’s intellectual property, or lack of it.

If share price is an indication, investors look at Google as a company in trouble.

Douglas A. McIntyre