Many observers have been noting that, with CEO Larry Page absent from the bridge, Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL), the parent company of Google, is suffering from a lack of direction. While the Nasdaq Composite average is up a fat 8.4% so far in 2018, GOOG stock is up just 4%. Since late August, the stock is down 7.6%. That may not sound like much, but it’s over $60 billion in market cap, wiped out.
As I have noted before, Alphabet stock is increasingly vulnerable.
There are non-Google reasons for this. There has been a rotation out of big tech into more defensive names. But there is little doubt the company is taking on water, closing its Google Plus social network, dropping its bid for the Pentagon’s cloud contract and dodging questions about its efforts to build a search engine China would love.
In a business where reputation is everything, GOOG’s is taking some massive hits.
GOOG Stock: Losing Ground
As Google prepares to announce its latest Android phone, Chromebook laptop and watch and Google Home speaker offerings in New York, it seems to be losing ground on all fronts, to cloud rivals Amazon (NASDAQ:AMZN), Microsoft (NASDAQ:MSFT), Facebook (NASDAQ:FB) and Apple (NASDAQ:AAPL).
First, did you know Google was holding a press event today in New York? Second, did you care? No. Google lets others lead in hardware, and just provides something similar or cheaper, later. How long will this continue to work?
Closing Google Plus leaves Facebook with a virtual monopoly in the social space, while Apple is expected to take $12 billion from Google next year for letting it remain its default search engine. As Apple’s own cloud services continue to grow, the chances that Apple will get into search itself also grow.
Ad agencies may be pulling billions of dollars out of Google’s ad platform and investing it in Amazon. Most of the moves so far are in packaged goods, and some of the move is to YouTube, a Google property. It should be worrying.
The truth on all this will come out Oct. 25, when analysts are expecting Alphabet to report $10.25 per share in earnings on $27.25 billion in revenue. Failure to hit those estimates will be costly for both GOOG itself and Alphabet stock owners.
A senior leader at Google Cloud, meanwhile, admits the group was slow to offer container and serverless technologies it was using itself, which let rivals like Microsoft poach accounts.
A lot of this criticism may just be sour grapes from exiting executives, like the PR manager who said that the company claims it can target ads to individuals but can’t find bad actors on the platform.
Some of it is simple blindness, like closing an AI project for the Pentagon just as executives headed to Washington to be quizzed by Republican Senators about China. Small wonder that the FTC is suddenly looking at Android violating antitrust laws — things get connected, even if Google doesn’t connect them.
Some of it is also infuriating. Journalists who find copies of their scoops ranked higher on the search engine than the scoops themselves should know the same thing happens to Google. Uh … oops.
Bottom Line on Alphabet Stock
It all points to a lack of leadership and focus from the top. It points to drift, and even the largest companies can be destroyed by a failure to pay attention.
Google desperately needs an injection of urgency. If Larry Page can’t be bothered, if the company continues to remain aloof to the scandals surrounding it, the cost to GOOG stock owners is going to become extreme.
Dana Blankenhorn is a financial and technology journalist. He is the author of a new mystery thriller, The Reluctant Detective Finds Her Family, available now at the Amazon Kindle store. Write him at firstname.lastname@example.org or follow him on Twitter at @danablankenhorn. As of this writing, he owned shares in AMZN and MSFT.