In the web surfing world, Google Inc. (NASDAQ: GOOG) is the undisputed king of searching for internet pages. But in the corporate boardroom, Google also appears to be the king of searching for start-ups to snatch up.
Despite what most folks would consider fairly lean times, Google has gone on a $1.1 billion shopping spree so far in 2010, buying up 22 companies.
The move shows that Google isn’t content to just rest on its search engine laurels, but is actively trying to grow and diversify its business. But the huge number of buyouts begs the question whether GOOG executives are making shrewd moves to stay on top or overreaching at a time when many corporations are on the defensive.
It’s worth noting that more than half the $1.1 billion price tag of Google’s shopping spree in the first and second quarters comes from the recently completed acquisition of mobile ad service AdMob. Serving online ads has been a natural extension of Google’s initial technology and a very healthy revenue stream, and the acquisition will help GOOG better adapt to mobile advertising trends.
But after that $681 million deal, the next largest buyout was a $123 million acquisition of video service On2 Technologies Inc. – showing that the vast majority of Google’s moves in the first half of 2010 were to pick up companies that were little more than seedlings.
Some seem to serve the core of Google’s business – such as ReMail, a company that developed e-mail search software, and Aardvark, a social search service where humans and not computers provide answers. But others seem to have little in common beyond simply being technology firms. The 2010 buyout hit list also includes Agnilux, a server technology start-up, and Simplify Media, a company that focused on the very particular area of “music syncing.”
And there are more mergers in the works for the rest of the year. The biggest deal on the horizon is Travel technology company ITA Software Inc. Google made a bid of $700 million, and the deal is expected to close in several months after all the red tape and regulatory approval is dealt with. This could be a potential game changer for other online travel giants like Priceline.com (NASDAQ: PCLN), Orbitz (NYSE: OWW) and Expedia
(NASDAQ: EXPE).
Or, it could be a $700 million boondoggle that is great for those receiving buyout checks at ITA but a flop for Google.
Google hasn’t seemed to get much momentum going in 2010, with shares down about -20% while the broader market is pretty much flat. Seen through this lens, some may think GOOG execs are just flailing around trying to get their stride back – or to hang on to dominant status that could be waning in the tech world.
But if one thing is true about the technology sector it’s that innovation is the biggest equalizer between companies large and small. If Google keeps swinging the bat at start-ups, it could very well hit a homerun soon. And with a market capitalization of over $150 billion, GOOG can afford to swing and miss many more times before it becomes a problem for the internet giant.
As of this writing, Jeff Reeves did not own a position in any of the stocks named here.
Triple-Digit Profits No Matter What the Market Does. You are not at the mercy of the markets. You can start adding triple-digit winners to your portfolio now if you’re ready to embrace the new rules of investing. Let Jon Markman show you how to make money every day in up markets AND down.
