Michel de Guilhermier's Blog

Google Misses Its Target !

Google avait pour habitude de toujours battre les estimations des analystes, mais hier pour leur quarterly earnings report, ce fut raté ! Le fait qu'ils ratent pour la 1ère fois n'est d'ailleurs pas une bonne nouvelle pour personne.

Conséquence immédiate pour une action toujours "richly valued" (28 fois l'EBITDA quand même), elle a dévissé en après-séance de 7%, à 540$, en repli de près de 30% sur ses plus hauts historiques atteints début novembre dernier.

Le fameux Googmic Index (rapport entre la capitalisation de Microsoft et celle de Google) oscille depuis 2 ans autour de 50% seulement ! Les gourous techos qui prédisaient en 2005 que Google rattraperait Microsoft avant la fin 2006 en sont très largement pour leur frais. Quiconque a d'ailleurs un peu de bon sens sait qu'il est n'est pas possible de prévoir les fluctuations boursières et ne se lance donc pas dans de telles prédictions farfelues !

En passant, je trouve que Microsoft est plutôt une bonne affaire actuellement, des business solides et très rentables, une bonne croissance, et des estimations pour 2008 ayant été récemment réhaussées (à noter que Google ne donne plus aucune indication sur le futur). Se payant 11 fois l'EBITDA, le risque de downside est très limité.

Pile on gagne et face on ne perd pas grand chose, philosophie d'investissement que j'aime bien.

Messages personnels : merci Seb ;-)   Pasc, think about it !

Google Phone : No Competition for Apple's iPhone, Probably a Boost !

Last monday, Google al long last officially unveiled its mobile phone strategy, or at least part of it. It's no physical device, which comes as no surprise to me as this is not in Google's DNA, but a platform, callled Android.

It consists of an operating system, middleware, a so-called user-friendly interface (remaining to be seen), and applications. Android-powered mobile phones should be available in the second half of 2008.

Thirty-four companies have said they will join the Open Handset Alliance, a multinational alliance that will work on developing applications on the Android platform. HTC, Motorola, U.S. operator T-Mobile, and chipmaker Qualcomm have announced they would join the alliance. Neither powerhouses Microsoft and Nokia are in it, nor Apple as a matter of fact.

Indeed, the software will compete directly with smartphone software from leading companies, Apple, Microsoft, Nokia, Palm, and Research in Motion.

With over a billion mobile phones sold worldwide vs only 250M PCs, and the coming of the mobile Internet, Google had to jump into the arena.

But frankly, as it is today, I have somes reserves, if not doubts, about the venture. In any case, I don't think it will grab much market share away from Apple as the plan is to drive smartphones into the mass market price points under $200, consequently competing in a different segment. Apple will probably, and for a long time, continue to lead the pack in terms of product design and user interface. it will prosper in its own segment, and even probably benefit from Google's initiative which aims at mass-distributing smartphones.

Up to now, the smartphone segment represented around 5% of the mobile phone market. No doubt that, thanks to Apple and Google's initiatives, it will from now on considerably expand.

Et le GoogMic ?

Ca faisait longtemps que je ne l'avais pas évoqué ce fameux index GoogMic, qui donne le ratio entre la capitalisation de Google sur celle de Microsoft.

Puisque certains prévoyaient fin 2005 que Google dépasserait Microsoft en terme de capitalisation boursière avant la fin 2006, j'ai pensé utile de suivre la progression !

Début 2006, le GoogMic était à 45% environ. Google valait donc un peu moins de la moitié de Microsoft.
Début 2007, le GoogMic était toujours à 45% environ (après un plus bas à 35% et un plus haut à 50%)
Et aujourd'hui, début août 2007, il en est à 48% !

Bon, de fait, rien a bougé réellement dans le rapport de capitalisation entre Google et Microsoft et ce n'est certainement pas en 2007 non plus que la firme de Mountain View pèsera plus lourd à Wall Street que celle de Redmond.

Pour suivre au jour le jour : www.googmic.com !

Google Phone ou Pas ? Prospective sur le Téléphone Portable !

La rumeur d'un Google Phone n'est pas nouvelle en fait, elle date de plusieurs mois, mais elle a refait surface ces derniers temps.

Tout comme un iPhone me semblait un move totalement stratégique et indispensable pour Apple, pour protéger notamment sa position dans les lecteurs MP3, je pense qu'un Google Phone aurait aussi beaucoup de sens. Google se veut le roi de la recherche (sur tout, partout et tout le temps, c'est pour ça qu'ils veulent indexer le monde et son savoir), et il est évident que dans 2 ans, dans 5 ans ou dans 10 ans, le téléphone portable sera très certainement l'un des principaux devices de recherche, devant l'ordinateur. Ce dernier ne vous accompagne pas partout et tout le temps, alors que votre téléphone, si.

Cette "prolongation" n'impliquera certainement pas que Google se lance dans le manufacturing, ni même d'ailleurs dans le design d'un téléphone (à noter qu'Apple ne produit plus rien actuellement, tout est sous-traité, ils se concentrent sur le design industriel). Contrairement à Apple, Google n'est pas dans le business du consumer electronique depuis 30 ans. Une arrivée en solo dans ce secteur saturé et très difficile qu'il ne maîtrise pas est à écarter, Google ne peut donc que s'allier à un constructeur existant.

Allez, une prédiction, il y aura sous 18 mois un Google phone sous une forme ou une autre ! Je peux aussi prendre le risque d'avancer que, s'il existe, il sera moins beau et moins attirant que l'iPhone. D'ailleurs, dés que ce dernier sort aux US en juin, je m'y précipite !

Il y a 10 ans, un portable servait à téléphoner, point. Maintenant, on y écoute ses musiques MP3, on flashouille à tour de bras avec l'APN intégré, certains regardent la télé avec, ou surfent sur le web et envoient des emails, etc. Demain, on peut parier que les usages se multiplieront encore, ou se banaliseront largement (surtout).

Je crois d'ailleurs dans le m-commerce à terme, même si on en est encore un peu loin actuellement. Le portable est une excellente opportunité pour établir un lien étroit entre l'e-commerçant et le consommateur. Pouvoir commander tout le temps, partout, facilement, s'enquérir de l'état de sa commande ou autre, voila des perspectives intéressantes.

Mais pour en saisir tous les bénéfices, il faudra bien que le e-commerçant et son organisation soient animés d'un profond sens du consommateur. Et là, il y a du travail ! La possibilité pour un consommateur, grâce à son portable, de s'enquérir "on the go" de la disponibilité ou du prix d'un produit conduira à des situations intéressantes : imaginez par exemple que le consommateur se trouve chez Darty pour acheter ceci ou cela et interroge en même temps le web pour connaître le prix de l'objet convoité ailleurs.

Prêt à acheter dans un magasin, je me suis déja dit que s'eût été bien si j'étais auparavant aller surfer sur le web, ou si je pouvais le faire dans la minute. Demain, ce sera parfaitement possible. 50% des internautes qui ont acheté en magasin sont aussi allés se renseigner avant sur le web, mais dans quelques années on s'approchera des 100%.

Le web a amené une concurrence exacerbée, et ça ne va pas s'arrêter. Le consommateur sera de mieux en mieux informé, tout le temps, et en temps réel. Commerçants et e-commerçants, vous allez vraiment devoir réfléchir à vos éléments de différenciation et de compétitivité !

Viacom Demande 1 Milliards de $ à Google pour Violation Massive de Droits d'Auteur !

Ce qui devait arriver, et ce que les observateurs avisés attendaient, est arrivé ! Viacom assigne Google et YouTube en justice et demande 1 Mds $.

Viacom accuse Google de "violation massive et intentionnelle de droits d'auteur sur ses contenus de divertissements".

Le partage de videos est sans conteste une killer app, mais il va certainement falloir réviser le modèle de sourcing sans doute ! On ne peut tout de même pas gagner de l'argent en utilisant le pouvoir d'attraction de contenu protégé par du copyright. Cela est valable pour la video comme d'autres types de contenus, mais la video reste de loin le contenu le plus attractif et universel.

Google Around $500, How About the GoogMic Index ?

So, Google has done pretty well over the last days and is now standing around the $500 threshold.

But the famous "GoogMic Index" (www.googmic.com) still languishes significantly below 50%, meaning that Google is still less than half the market cap of rival Microsoft. The GoogMic index started 2006 around 45% and now, one year later, still is in the same waters. No more, no less

For those so-called web 2.0 internet gurus who early 2006 boldy predicted that Google would beat Microsoft's market cap before end '06, the GoogMic Index is the perfect indicator showing how badly wrong they were.

It's fine to dream, but it's even better when reality matches !

So, Google Hits the $500 Mark, What's Next ?

The Mountain View search king hit a new all time record yesterday and ended the trading day above $500, at almost $510. A milestone which is purely psychological, but still, a "6 bagger" (August '04 IPO price was $85) in slightly more than 2 years is truly impressive.

However, since Jan 1st, Google hasn't really distanced Microsoft as the Googmic Index stands at 47% vs 45%. In fact, it has oscillated between 35 and 52% over the last 11 months. As I expressed it in August, Microsoft still is a behemoth with considerable financial and technological resources.

With a trailing P/E of 65 and a PEG of 1.5, Google is definetly not a cheap company, but there's nothing outrageous as well : Microsoft has a P/E of 24 but its PEG is also around 1.5. However, as many of its businesses are mature, it today offers more earnings visibility than Google.

True the online advertising market is growing fast and should at least double in the coming 5 years, true Google is a master at monetizing trafic more and better than anybody else (let's just mention that Yahoo drives considerable more trafic than Google but the latter is able to yield 3 times more revenue per search !) but I can't help thinking that Google competition is more formidable than what Microsoft faces in its core markets. Moreover, trafic is coming from everywhere on the Internet and even if Google is a master at turning it into dollars, it will have to share these dollars. This is more or less what it did with buying YouTube, conceding roughly 1% of its equity ($1.65bn out of a market cap of circa $150bn at the time).

Interesting enough, Apple also has a PEG of 1.5, with a PE of close to 40. Despite the formidable rise of the stock over the last 2 months (from the low 50s to almost $90 now, ie +80%), I'm still bullish for the medium term (ie 2 year time horizon), with the same analysis I have explained many times on this blog : Apple is at the crossroad of several fast growing markets and with its strong brand, its consumer electronics hardware + software technological prowess and its financial health, it is ideally positioned to benefit from them more and better than anybody else in the industry.

Google's Quarterly Earnings : also Impressive !

No need to comment a lot on this one, I guess everyone will have already read the news some place else !

Google reported its quarterly earnings yesterday thursday after maket close, and once again they were mind blowing : sales grew by 70% while profit almost doubled. Net margin stands at 28% !

What a contrast with Yahoo which reported a meager 19% increase in sales and a 37% drop in profit. On top of that, they gave a dim outlook on Q4, which is mainly why the stock dived afterwards (the bad news relative to Q3 earnings were factored in the price already).

In absolute numbers, Google earned almost 5 times Yahoo's net profit. Google continues to gain market share in search while Yahoo is losing shares. Googles take an increasing piece of the advertising pie and leaves the crumbs to all the others.

Google's stock price will benefit from a strong lift today which should push the GoogMic index back to the 45% area.

Investing : Update Google vs Microsoft !

The Googmic Index is still in the 42-43% area, which is virtually its early '06 level and basically right in the middle between a year low of 35% and a year high of 51%.

Over the last 3 months, while Google grew by a meager 5%, Microsoft jumped 25%. Mid August, I believed Microsoft was a reasonably priced stock with a strong potential ahead, and despite the recent rise I still believe it is.

About a year ago I mentioned that while Google managed to get itself loved by people, Microsoft had a long way to go there. It seems that things have changed and Google ever growing dominance on the web is now starting to have the same negative image effect as Microsoft's quasi monopoly in operating systems and office softwares had.

The very nature of the Zune project should also improve Microsoft image, though I today find it very hard to associate the Microsoft brand with such a product : it just seems very weird, a bit like putting the Nescafe brand on a pasta pack : it doesn't really fit ! I have big doubts on the success of the Zune, but the point here is just to mention that it will somehow contribute to improve the image of the Redmond giant.

As for Google, I stand by the same advise : it's an excellent long term bet and will definetly beat the market. The Googmic Index should gear toward 1 in the distant future, but I will not make any forecast as to when (don't think '07 is likely) ! Internet still is a fast growing environment, Google's technological prowess and R&D capabilities are remarkable, but its sheer size and dominance also make it vulnerable to numerous problems, both internal and external.

At one point in time, Google will very probably have to deal with the same issues Microsoft has faced : too much arrogance, formal and informal alliances of competitors teaming up to kill the beast, government actions to limit dominance, anti-trust lawsuit, etc.

20 Months to Create $1.6bn !

So, the rumor was founded and Google yesterday evening confirmed it had acquired YouTube for $1.65bn in stock !

For the video sharing site launched in February 2005, and who had raised about $11M, that's a pretty impressive achievement. It had managed to grab almost 50% of the online video market, ahead of MySpace, with Google a very distant third player. 100 Million videos viewed a day, that indeed blows my mind away ! Didn't I say several months ago that video was the next big thing ?

Although $1.65 is very rich by all measures, Google share did not tumble in after market hours (just inching down), so investors don't seem to be much concerned by the acquisition price.

Google had been criticized on relying too much on advertising tied to keywords. Here's a new fast growing source of trafic and advertising possibilities and a way to compete against the other star of the moment, MySpace. The combination of Google Internet prowess with YouTube video stream will intrinsically be very powerful and interesting to watch. Microsoft, Yahoo and NewsCorp must react.

Will Google manage to monetize YouTube trafic in a way it pays for the acquisition, and how, this of course remains to be seen. However, Google has proven they are masters in monetizing trafic more and better than anybody else in the business. So, as I'm concerned, I do think this deal makes sense for both companies : Google acquires a strong brand name and a huge trafic, YouTube teams up with fantastic technological and monetization skills.

Sure, $1.65bn is a price, but that will make no dent in Google's cash position as it's an all stock deal and Google itself is pricey (P/E of 60+, though PËG is a mre reasonable 1.44).

Update 4PM : stock market salutes the acquisition : Google is up slightly while Yahoo and Microsoft are down (googmic Index up to 43%).

Update 10 PM : Google eventually inched down 0,6% but Yahoo lost more than 2%. Yahoo is now at its lowest point in more than 2 years. In the same time, Google has jumped about 300%...