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Friday, March 9, 2012

Google - unloved, but a ton of potential

It was only one quarter ago when Cramer was touting Google and throwing away Apple.  That all changed when Google reported their quarterly results and Apple reported theirs. That is when the script flipped. Now its mo-mo Apple, and no-no Google.

When AAPL was out of favor last quarter, I was touting its fundamentals, and calling bullshit on the negative nellies. I still like AAPL and think its best of breed, but now that everyone wants to poop-poop Google I am going to let the data guide my thesis.

Over the past few months Google has not been getting a 'free pass' from the blog-o-sphere. (I include myself in this camp.) Everyone, I mean every influential blogger has called out Google's 'no evil' mantra with the new data policy. (I can link the articles but anyone can google Danny Sullivan, Sarah Lacy or John Gruber and others to see their opinion on the matter.)

Everyone can have their opinion on the actions of Google, but I always felt (and feel) Google is going to do what it has to do in order to properly compete with Facebook and Apple.  They will push and alter their policies to where they think necessary, and the true test will not be the opinion of the bloggers, but the actual usage of their services.

The data is now coming in since the uproar in the blog-o-sphere, and comScore showed an increase in market share from Jan (66.2) to Feb (66.4).

Despite all the negative chatter, Google's search business was not affected.

With the new private policy in place, Google finds itself in a position to leverage all its properties and better compete against Facebook. IMO, like it or not this is a positive development for the company.

Another positive development is the unification of the Android Market place, and enforcement of its in-app payment policy. (Google Play and purchases)

In summary, I am seeing things I want to see. The recent developments for Google has shown their attempts to streamline their policy to compete with Facebook has not hit core search. And they are streamlining their mobile ecosystem. Now the Motorola deal has to close so they can, at the very least, streamline Motorola's product offerings. (Most importantly reduce the 27 product offerings from Motorola to only a handful. Although I have written extensively on what I would love to see from the MMI acquisition.)

Since Google reported their disappointing quarter, the trading dynamic has been basically following the SP500. Unfortunately, today that was not the case.  Technically, the stock looks very interesting at the current levels. Although it may test its 85SMA if the market turns weak.

IMO, Google is in the best position to compete with Apple in the 'post PC' world. Make no mistake, Google is far, far, away from unseating Apple as the best of breed in the post PC world (for reasons I will not go into now because I do not want to make this post about Apple), but Google does not have to beat Apple to benefit the stock at current levels. Google just has to show better competition.

If Google can show it is benefiting as a player in the Post PC world, the market will reward it. If current  SP500 sentiment holds up, Google's trailing multiple will approach 23-25.  (This could happen when they issue a viable game plan for Motorola or after their next earnings report.)

NOTE: The new iPad will not have Siri.  This removes a concern, for now.

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