The Financial Times has floated the idea that Wall St. is sick of Google’s attempts to get into businesses outside of search and moving nowhere in the process. Investors holding the stock probably discovered that some time ago. Google’s shares are up about 7% over the last six months while the Nasdaq is up 5%.
The lack of appreciation in Google’s shares may cut two ways. Given that the company is still growing quickly and has close to 50% of the global share in online search, the company’s stock may be cheap. For the time being, that is probably right.
Those pessimistic about the search company’s shares can’t figure out why the firm has not had any success getting into another substantial business. Google has begun businesses that sell print and radio advertising. It has instant messaging, mail, and desktop software businesses. It has set up shopping and financial sites. A look at Google’s earnings show that none of them contribute anything to the company’s revenue.
Google’s new businesses may not go anywhere soon, but its search operations are growing so fast and are so profitable that the investment it is making in new operations hardly matters. Even if most do not pay off, they are having very little impact on Google’s numbers.
Google’s stock may be down, but the fact that it has not had a successful effort at diversification hardly matters. Selling the shares due to that makes very little sense.
Douglas A. McIntyre
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