Sunday, November 11, 2007

Google mania continues amid sense of deja vu

With Google's share price climbing above $700, an eerily familiar debate raged Wednesday in the blogosphere, on Wall Street and across Silicon Valley: was the latest internet wonder vastly overvalued? Or is the Google phenomenon just beginning?

Google's stratospheric valuation ranked it as the fifth-most valuable company in the US by share value, with stock worth $219 billion.

The dizzying price means that Google is worth more than eight times as much when it went public three years ago. It also means that Sergey Brin and Larry Page, both 34, who founded the company just 10 years ago, are now worth $20 billion each.

The only companies worth more than Google are oil colossus Exxon Mobil, conglomerate General Electric, software giant Microsoft and the telecom titan AT&T.

Google is worth more than consumer-products leader Procter & Gamble at $215 billion, financial giants Bank of America and Citigroup at $213 billion and $209 billion respectively, and established "old economy" brands such as Coca-Cola at $142 billion and McDonald's at $70 billion.

If you put your trust in Wall Street analysts, the company is still just starting its growth spurt as it attracts the brightest technology minds from around the world and aggressively seeks to expand its core business of search-linked advertising to a myriad of markets across the world.

A Bloomberg News poll of 37 analysts found 33 of them rating the stock as a "buy," meaning they believe it will climb in value. The other four, rated Google as a "hold," meaning it is likely to remain stable.

The recent run-up comes amid reports of Google aggressively moving into the mobile telephone market, which is seen as the great-uncharted territory of internet advertising. The company is reportedly close to completing the so-called gPhone - a set of mobile phone technologies meant to make Google's standard features as accessible on cellphones as they are on PCs.

In another initiative announced this week, Google released a set of software standards for social networking sites that could see it take a central position in one of the internet's fastest-growing sectors.

Even without these initiatives, Google's profits seem on an unstoppable growth upswing. Its recent third-quarter earnings showed a 46-percent leap in net income to $1.07 billion as revenue grew 57 percent to $4.23 billion.

But veteran Silicon Valley venture capitalist Richard Hansen believes that Google has grown too fast, and that investors could get burned when it comes crashing down to earth.

"If there's anything the last tech crash taught us, it's that what goes up must come down," he said Thursday. "Google can't live up to the hype or the financial expectations."

There were certainly plenty of commentators in the blogosphere who seemed to agree.

"I can rattle off a long list of tech companies that grew faster than they could handle, and then started to implode," said "Googlefatigue" on a New York Times message board.

"Google is going to implode. It will go down as one of the most infamous falls from grace in American history," said George Riddick, chief executive of Imageline.

But there were even more people who believed that Google was at the centre of a media revolution and well placed to capitalize on a wealth of opportunities.

"Microsoft today is trading at approximately 30,000 percent higher than its initial price," noted blogger Herb Sunderman. "Google at $700 is just beginning its ascent."


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