by Jeff Reeves | September 27, 2013 10:55 am
Google (GOOG) has come under fire recently for being a bit more corporate with its strategy — which, since GOOG stock is a publicly traded equity with obligations to Google shareholders, was bound to happen.
So as Google’s birthday rings in 15 years of operation this week, some are wondering if the tech giant is getting to be an evil, unruly teenager as it grows up.
GOOG stock, to be clear, has no obligation to operate as a nonprofit entity. And bigger picture there is nothing inherently bad about having dominant product that throws off big money; part of the reason GOOG is so dominant is because “Google” is now a verb thanks to the ubiquity and usefulness of its search programs.
But still, there’s always been a veneer of respectability and edginess at Google that has made investors and the public at large optimistic about its growth potential and innovation.
So at 15, is Google still thinking big and putting ideas and usefulness first? Or is GOOG stock suffering a lazy teenage spell where it just wants to kick back, make a little trouble and lose the imagination of its youth?
GOOG stock has indeed been going through a growth spurt in recent years. Shares are up 700% since the Google IPO in 2005, and more recently Google stock is up 70% from its 2011 lows.
The Google balance sheet has also been off the chart, with revenue more than doubling since 2009 — a huge feat in contrast to the stocks that suffered thanks to the broader economic meltdown — and gross profits are running at about $8 billion a quarter.
GOOG stock has also sucked up other companies, as it tends to do, with a big acquisition of Motorola Mobility in 2011 for $12.5 billion. More recently, there has been the nearly $1 billion buyout of GPS software outfit Waze in an effort to bolster Google Maps.
But amid this growing have come complications — especially lately.
In 2013 alone, GOOG has shut down its small but popular Google Reader program, admitted Gmail users have no expectation of privacy, and has even been sucked in to the endless smartphone patent litigation that characterizes rivals like Apple (AAPL) and Samsung (SSNLF).
Some contend this the natural progression of a dominant tech company that now generates $50 billion in annual sales and has another $50 billion in the bank to play with.
But others say Google stock has tainted Google innovation, with a quest for profits above growth through great products.
GOOG stock investors didn’t need any further proof than when Larry Page vowed to put “more wood behind fewer arrows” — which means closing underperforming products, which has been a key part of Google in recent years as well as a key driver of GOOG stock price as costs have been cut.
Now, Google isn’t a complete sellout and GOOG stock price isn’t solely driven by bean-counters. A lot of ambitious projects are going on at Google’s Mountain View headquarters right now, from its Moto X smartphone to Google Fiber internet access in select markets to the wearable tech known as Google Glass.
Innovation is alive and well at Google. Make no mistake about that.
But the company has an obligation to shareholders — make no mistake about that, either.
As such, Google will continue to push ahead with ways to optimize display advertising — which you can bet is behind the new Hummingbird algorithm for Google search, though optimizing results for regular internet users is surely a part of it too.
Also expect more innovation as a way to segment users and monetize them, as we saw with Gmail relaunching with tabs — one of which is dedicated to promotions and advertisements.
And, of course, expect it all to be integrated into one big Google umbrella that includes hardware and software and everything that orbits the internet experience.
We can debate whether this approach will ultimately prove to be “evil,” whether it’s just business or whether GOOG stock will ultimately be best served by Google just being Google and putting internet users first.
But at 15, there is a lot going on in Google’s life as it enjoys “adulthood” as a megacap tech stock with market dominance — with all the power and responsibilities that come with it.
Jeff Reeves is the editor of InvestorPlace.com and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” As of this writing, he had no positions in the stocks mentioned. Write him email@example.com or follow him on Twitter via @JeffReevesIP.
Source URL: http://investorplace.com/2013/09/goog-stock-google-evil-15/
Short URL: http://invstplc.com/1bannxs
Copyright ©2015 InvestorPlace Media, LLC. All rights reserved. 700 Indian Springs Drive, Lancaster, PA 17601.