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<p>Thanks for the info. That is much more interesting and relevant to the discussion than pages of debate on an old study that most don’t know or care about that was only ancillarily related to the topic at hand.</p>
<p>Watch out Microsoft, here comes Google. It was just a matter of time. Sure Android may not be a threat NOW, but after more marketing, more development, more $$$, advancements, after the next 2nd or 3rd or 4th versions, would you want to bet against Google’s ability to come up with a product that is superior to Windows (which is totally unreliable)? </p>
<p>It amazes me that Windows still crashes routinely even after the sheer amount of testing, development, time and money that has gone into this platform. What amazes me more is that MSFT has still been able to hold onto its monopoly with such a crappy product. If you had a major household appliance crash every 10 times you used it, wouldn’t you be reasonably open to a replacement?</p>
<p>Competition. You can’t beat it with a stick. Couldn’t have come sooner.</p>
<p>[Google’s</a> Android to Run Laptops, Taking On Microsoft (Update1) - Bloomberg.com](<a href=“Politics - Bloomberg”>Politics - Bloomberg)</p>
<p>did you mean to post this in this thread?</p>
<p>yeah, I know it seems kind of non sequitur – but it does continue an earlier discussion I was having with sakky about Microsoft vs. Google (I was arguing that Google was not a one trick pony with regards to future business prospects, etc.)</p>
<p>I’m sure that Google probably will come up with additional businesses. After all, with all of the capital that Google is investing in myriad projects, it is bound to come up with a few that are successful. Throw enough mud against the wall, and some will surely stick.</p>
<p>My point has always been regarding valuation. The market has already priced in the fact that Google is expected to develop new profitable businesses. The choice of whether to invest in any particular stock has little to do with the prospects of that firm, but rather has to do with the valuation of that firm. Even the greatest firm in the world can be overpriced. Conversely, even a terrible firm can be underpriced.</p>
<p>sakky, your point is absolutely taken re: valuation, but you did say earlier (specifically post 49) that Google was essentially a one-trick pony (and citing risks related to this) whereas MSFT enjoyed multiple revenue streams.</p>
<p><a href=“http://talk.collegeconfidential.com/1062290955-post49.html[/url]”>http://talk.collegeconfidential.com/1062290955-post49.html</a></p>
<p>Further, every business has the opportunity to expand into different businesses (Google or MSFT or Ford is no different from that perspective). Witness the Big 3 autos finally waking up to the “green” / electric vehicle opportunity while Toyota has been eating their lunch. What does set firms apart are (at least) two distinct things:</p>
<p>1) The capacity for such investments
2) The likelihood of success from such investments</p>
<p>For Google:</p>
<p>1) It enjoys fantastic cash flow and a sterling B/S (net cash-no debt) –> i.e. allowing them to make these kinds of investments without hurting their overall financial position (this is absolutely an inherent competitive firm advantage)
2) Their strong ability to execute (operationally, technically or otherwise) and market (strong brand loyalty) is absolutely an inherent Google specific advantage</p>
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<p>Well, frankly, Google is a one-trick pony, as the vast majority of its revenue, and well over 100% of its profits, come from a single business, albeit the fantastic business of search advertising. Yes, they earn over 100% of their profits on search advertising as the rest of their businesses lose money in the aggregate. </p>
<p>Note, that’s not to say that Google will always be a one-trick pony, for I’m sure that they will inevitably find another business. They better, considering how much they’ve invested in trying to do so. </p>
<p>Yet the fact is, most of their new businesses have, frankly, faired. Google’s foray into print newspaper/magazine and radio airtime advertising has been an unmitigated disaster that Google has pulled the plug on, and its TV advertising business has flopped also. The Chrome web-browser has gone nowhere fast, with less than a 2% market share, standing in stark contrast with Firefox - which is backed by a nonprofit foundation - that holds over 22% share. Google Video has done basically nothing, which is why Google felt it has to cough up $1.6 bn to buy YouTube, which will almost certainly be an epic money sink for Google because - for all its popularity - Yahoo generates minimal revenue. Marketers don’t really want to buy ads matched to grainy videos of dogs riding skateboards and Mentos/DietCoke eruptions no matter how popular they may be. The Register, backed by a Credit Suisse Analysis, has deemed YouTube a “half billion dollar failbucket” because of its large bandwidth costs and royalty payouts which dwarfs the minimal ad stream, which has failed to grow significantly ever since Google bought the company, despite the growth of the user base. </p>
<p>[YouTube</a> a ‘half billion dollar failbucket’ ? The Register](<a href=“http://www.theregister.co.uk/2009/04/07/youtube_revenue_fail/]YouTube”>YouTube a 'half billion dollar failbucket' • The Register)</p>
<p>That’s not even incorporating the biggest downside of Youtube of all - the extra luggage of legal liability. Let’s face it: much (probably most) of YouTube’s popularity is derived from copyright violation. By buying YouTube, Google has made itself to be a fat juicy target for every media company whose works have been illegally appropriated onto YouTube, that is to say, every media company in the world. Viacom is in the process of suing Google for $1bn, and other media firms are likely to follow. Granted, Google can and has signed royalty agreements, but that only reduces the financial viability of YouTube still further. </p>
<p>And then of course may be the biggest threat of all - the new world of social networking, of which Google is a clear also-ran. Google has yet to develop a coherent strategy against Facebook, which for millions of users is now the first website they visit, supplanting Google, when they fire up their browser. Facebook aims to develop an advertising & media model based on social connections and interactions that is completely opaque to the Google model that draws information from search keywords. Google’s counterthrust of a partnership with MySpace is widely viewed as a bust, as is Google’s own social networking product, Orkut. </p>
<p>[Source:</a> Google Values MySpace Deal At $75 Million/Year Or Less](<a href=“http://www.techcrunch.com/2009/05/21/source-google-values-myspace-deal-at-75-millionyear-or-less/]Source:”>http://www.techcrunch.com/2009/05/21/source-google-values-myspace-deal-at-75-millionyear-or-less/)</p>
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<p>First off, from a valuation standpoint, I don’t see why having the financial resources to make investments is necessarily a good thing. The goal of any firm is not to simply make investments, but rather to make investments whose returns exceed the cost of capital. To do otherwise is to destroy shareholder value by reducing the return on equity. Companies that can’t find investment opportunities that justify the cost of capital are well advised to simply return capital to their shareholders in the form of dividends or buybacks. A long stream of academic literature denotes management frittering away equity capital on empire-building via investments that produce low return, or sometimes negative return. </p>
<p>Secondly, the US capital markets, for all their recent problems, are still a remarkably deep and flexible mechanism via which firms can access funding as needed. This is especially true in the tech industry, as venture capital firms are willing to fund startups to the hilt as long as they seem promising. Facebook, despite not even being a public company (yet), has managed to secure sufficient funding to build a business model that poses a grave threat to Google, and Facebook could surely secure billions more if and when they decide to IPO. Google’s large financial reserves has helped little in this respect. </p>
<p>Secondly, I don’t see that Google really has a strong ability to execute, nor does it possess particularly stronger brand loyalty than most other large firms. If Google really did have such strong execution capabilities, then why have so many of its business ventures failed? Again, what happened with the radio/print advertising initiative? What happened with Froogle? What happened with Google Video? What happened with Chrome? What happened with Orkut? What happened with Lively, the supposedly deadly competitor to Second Life? What happened to Google Catalogs, Google’s effort to revolutionize Ecommerce by listing print catalogs of the established mail order vendors? What happened to Google Checkout, which was supposed to take down Paypal?</p>
<p>[Webware</a> Radar: Google Checkout stalls as Bill Me Later soars | Webware - CNET](<a href=“http://news.cnet.com/8301-17939_109-10162701-2.html]Webware”>http://news.cnet.com/8301-17939_109-10162701-2.html)</p>
<p>The above failures also bespeaks to Google’s lack of brand strength, which seems to extend only to online search. Google’s brand name does not seem to carry much weight anywhere else on the Internet, as demonstrated by the lack of success that Google has enjoyed in its other products. Less than 2% of Internet surfers are using Chrome despite its Google pedigree. </p>
<p>Contrast that with Microsoft. No doubt, Microsoft has suffered more than its fair share of failed products as well, such as the notorious Microsoft Bob. However, Microsoft has also demonstrated the ability to successfully and profitable leverage itself into differing market segments, such as its vaunted and fantastically successful foray into office productivity software and its less well known but arguably equally important strategic thrust into corporate servers (and routing former stalwarts such as Novell in the process), a victory that was really a triumph of marketing over technological prowess, as Novell Netware was clearly a more reliable product than the competing Windows NT Server. Even a high-profile technical failure such as Vista nevertheless generated billions in profit in the process, which only bespeaks to Microsoft’s tremendous market power: when even your failed products make money, you know you hold prime position in the market. </p>
<p>But anyway, my point is not to unfairly bag on Google to the benefit of Microsoft. Google is a tremendously successful company at what it does - arguably revolutionary. But we also have to be cognizant of Google’s faults, especially as it has to do with valuation. The market is valuing Google not for its present dominance of the search advertising market but for its potential to dominate other profitable markets, but, as yet, Google has not demonstrated the ability to actually do that.</p>
<p>sakky, while i don’t have time to go through all of your points, counterpoint by counterpoint, i think that is, on balance, a very biased / unfair portrayal of one of the most successful companies in the 21st century – certainly for the last decade.</p>
<p>in fact, its almost a one-sided list of their “failures” – though i absolutely do not consider YouTube a failure by any stretch – think about the sheer number of unique visitors that website generates alone – but i digress.</p>
<p>there are plenty of other things have Google has accomplished in its relatively short lifespan – it single handedly changed the game in advertising. </p>
<p>but aside from their leading ad products – off the top of my head, you’ve got their new browser, gmail, picasa, google earth, grand central (or now google voice) and now their foray into the mobile phone space and operating systems. </p>
<p>or even consider the E-library initiative. this is a company that thinks out of the box and has attracted the best and brightest minds from around the globe. of course it’s not going to be 100% successful at everything it does – name a company that does? one of my friends works at GOOG and is just simply impressed with the high level of intelligence (both textbook and otherwise) at this company. i don’t know, i think it has a pretty decent shot at staying successful.</p>
<p>… and the market (via millions of investors around the globe who vote with their cash, agree) Google now ranks as the 14th largest company (by market cap) in the S&P 500 and no. 4 in NASDAQ. It is a 135 billion dollar company by market cap.</p>
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<p>But where’s the money? That’s the point. Like I said, the Register has noted the Youtube acquisition as a complete “Failbucket”. In terms of profit, I would have to agree. The only impressive financial figure I can see from the acquisition is the legal liability which actually increases as Youtube becomes more popular. The more users that YouTube draws, the more opportunities for Google to be sued. </p>
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<p>Again, where’s the money? Which one of those businesses you just listed actually generates profit? I suspect that none of them do.</p>
<p>Come on, the_prestige, you know as well as I do that business is not a game. Businesses are supposed to make money. Google is not a university research lab. Nor is it an engineering tech center. Nor is it a nonprofit skunkworks designed to shower the world with cool tech products. It’s a business. Businesses are supposed to make money. Chrome, Picasa, Android, Google Earth, Gmail - all wonderful products to be sure, but none of them actually make money. The advertising technology networks - that is, Adsense, Adwords, and (maybe) Doubleclick - make money. But that’s it. Nothing else makes money.</p>
<p>Now, to be fair, perhaps one day, some of those other products might make money. But we don’t know that right now. </p>
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<p>Well, actually, Google has become a less interesting and less desirable place to work, and the best minds are being poached away to cooler, sexier companies, such as Facebook, Twitter, and other startups, including Sheryl Sandberg, who was VP at Google, now COO at Facebook.</p>
<p>The problem with Google is that it’s simply become too big. It’s no longer the freewheeling entrepreneurial company that it was once. The IPO days are long over, so nobody joins today Google with the expectation of becoming rich quick. Many (probably most) of the pre-IPO employees have already left, and many of the current employees came from acquisitions and are just biding time until their buyout options fully vest before they leave, often times to found a startup to recreate the innovative atmosphere that Google used to have. Heck, my former roommate is one of those guys - the company he founded was acquired by Google, and while he now officially works for Google, all he’s really doing is waiting for his acquisition package to fully vest before he leaves. </p>
<p>Nor as I the only one saying so:</p>
<p>*…the Ooyala founders say what they lack in institutional backing they make up for in speed and the ability to communicate with one another by turning around in their chairs and talking. Google was like that too, about eight years and 18,000 employees ago.</p>
<p>It would be easy to dismiss the exodus of some of Google’s best people if it were an isolated occurrence. It isn’t. Paul Buchheit, an early Google engineer who coined the “Don’t be evil!” battle cry, is a founder, with three ex-Google colleagues, of a social-networking company called FriendFeed. Yanda Erlich, once a popular Google product manager, started an instant-messaging company called Mogad. Nathan Stoll, who managed Google News, is hard at work on his new company, Mechanical Zoo. (It’s in “stealth mode”- no details.) Former business-development guys Salman Ullah and Sean Dempsey have a new venture capital firm, Merus Capital, that aims in part to fund startups founded by ex-Googlers. (That’s employees, in Googlespeak.) The departures have grown so numerous that the exiles have formed an informal alumni club of ex-Googlers turned entrepreneurs. David Friedberg, another former biz-dev executive, who started a company called WeatherBill, which sells insurance pegged to climate risks, recently attended the club’s first meeting at a conference center in Palo Alto. “I was surprised by the number of things that were being done that could have been done at Google,” he says. </p>
<p>There’s been an exodus of executive talent too: Its chief information officer, Douglas Merrill, just left. Several top people have gone to Facebook, most notably Sheryl Sandberg, who ran Google’s automated ad sales, and Elliot Schrage, who ran PR. George Reyes, Google’s CFO, announced his retirement last summer and has yet to be replaced." *</p>
<p>[Where</a> does Google go next? (page 2) - May. 12, 2008](<a href=“http://money.cnn.com/2008/05/09/technology/where_does_google_go.fortune/index2.htm]Where”>Where does Google go next? (page 2) - May. 12, 2008)</p>
<p>Now, don’t get me wrong. I am not saying that Google is now a bad place to work - indeed, I would say that Google is still a more desirable employer than the vast majority of other firms out there, and certainly more so than almost any of comparable size. However, it is an undeniable fact that many of the most enterprising and creative engineers and managers don’t really enjoy working for a large and bureaucratic company, which Google has undeniably become. As companies become larger and mature, they inevitably lose flexibility. </p>
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<p>Which is actually the strongest point of favor for my argument. After all, what we are ultimately talking about is valuation. If Google was available for cheap, it would obviously be a very strong buy. If I could get Google for 2004 prices, I certainly would. But as you noted, right now, it isn’t cheap by any stretch. It is in fact one of the most richly valued companies in the world. Google is priced for perfection. </p>
<p>Again, what makes an investment desirable is that it is cheap relative to its prospects. That can hardly describe Google today. Investors shouldn’t care about how dominant Google’s technology is. All they care about is ROI, nor should they care about anything else. You don’t buy Google because it’s “cool”, you buy Google because it will supposedly provide a strong return.</p>
<p>Let me give you a historical example. Cisco Systems is one of the most precocious firms in the history of the tech industry and also one of the sexiest stocks: having been named Nasdaq Stock of the Decade in the 1990’s, being named one of Fortune Magazine’s Most Admired Companies for 10 years straight and counting, and in a few days will replace GM as a component of the DJIA. Cisco has maintained dominant market share in the Internet and corporate datacom router and switch markets, and has built profitable businesses in VoIP, optical, and consumer networking. </p>
<p>At the same time, it is nevertheless also true that for the last 10 years, Cisco has been a mediocre investment. Cisco’s stock today is about $20. In June, 1999, it was about $30. Lest you think I’m simply cherry-picking prices from the dotcom boom, I would point out that Cisco peaked at over $77 in March, 2000. Cisco today earns over quadruple the profit and over double the sales compared to 1999, and Cisco’s technology is as dominant as ever, to the point that Cisco is probably the third monopoly in the tech industry (after Microsoft and Intel). Cisco had therefore, from a business standpoint, fulfilled all of the promise of its youth. But that doesn’t matter from an investment standpoint, as any investor who bought Cisco in 1999 has lost 1/3 of his nominal dollars, without even factoring in inflation and the time value of money. Wonderful technology success story, but bad investment.</p>
<p>Google’s historic high was a mere 1.5 years ago (way post the dot com era) at over 700 bucks per share (it is currently about half that at 430) so you can easily argue that it has plenty of upside from these levels.</p>
<p>It is up 40% this year alone.</p>
<p>by contrast, Cisco and Microsoft’s performance YTD is less than half that, 18% and 12% respectively.</p>
<p>in other words a dollar invested in GOOG at the beginning of this year would have yielded you a return double that of Cisco and MSFT for the first 5 months of this year.</p>
<p>so while we can argue about valuation being priced in, the proof is in the pudding since during our discussion, GOOG has already outperformed MSFT stock nearly 2 to 1 in this short time span when I had highlighted that GOOG was a better investment.</p>
<p>Fund Managers can become farmers: Jim Rogers</p>
<p>[Fund</a> Managers can become farmers: Jim Rogers- Interviews-Opinion-The Economic Times](<a href=“Fund Managers can become farmers: Jim Rogers - The Economic Times”>Fund Managers can become farmers: Jim Rogers - The Economic Times)</p>
<p>Investing in stocks that are overvalued or correctly valued isn’t going to make you any money. GOOG, no matter how great of a company it is, does not deserve a market cap of 140B. I would be looking for undervalued blue chip stocks or putting money in index funds in banking. </p>
<p>Investing in Citi wouldn’t be a bad idea either, long term. Citi isn’t going to fail, and even if it does take 10 years, Citi will be back on its feet again. If you look at the history of the company, they always mess up once every 10-15 years; you just need to bail out before they mess up and then pick up the stock again in the aftermath. Banking is not going to go away anytime soon, it would have been wise to invest in it when it had hit bottom. </p>
<p>Sure you could’ve picked some bad apples like Lehman or Merril, but anyone worth their salt can tell the difference between a company thats teetering on bankruptcy and one that has potential. Putting money in GS would have been a good idea, its the safest bet on wall street, anyways.</p>
<p>I got into BAC at 6.56, very happy. I agree with investing in undervalued blue chips right now. Banks are still a good buy and I am looking into retail. GOOG has always been overpriced and too expensive for me.</p>
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<p>But that only serves to enhance my argument. After all, we are not talking about going back 5 months in time and deciding what to invest in then. We are talking about what to invest in right now. The more that Google may have outperformed the market (or any individual stock) in the past, the less attractive of an investment it is now, because that only means that it has less headroom to grow.</p>
<p>I’ve said it before and I’ll say it again, the best time to invest in a stock is when it is cold. I return back to the example of Citigroup: anybody who had the gumption to invest in C when the company looked ready to implode back in early March has now more than tripled his money. Back when the US finance industry looked as if it would dominate the world back in 2007 was precisely the worst time to invest in C or any other bank stock. Similarly, it was amidst the dotcom euphoria of 2000 that was precisely the worst time to invest in Cisco, to the point that those investors may never recover in their entire lifetimes, despite the fact that Cisco is a fundamentally far stronger firm now than it’s ever been. The price in 2000 was simply too high. </p>
<p>Put another way, if Google dropped to $100, I would sure buy it. Maybe $200 or even $300. But $400? That’s too rich for me. The upside is constrained. The higher it goes, the greater distance it has to fall. </p>
<p>The key to generating high investment returns is to look for undervaluation.</p>
<p>sakky, let’s be clear about one thing: i never said that i’d buy Google at ANY price. </p>
<p>i believed that at previous valuations levels (when we began this discussion) GOOG was an excellent buy (both short and long term). i continue to believe that it also presents good value currently (and for long term holders, excellent value).</p>
<p>as i mentioned earlier, its current share price is nearly 40% below its high of $700+ which it touched about a year and a half ago. frankly, as a “short term” trader, i’m prolly a seller north of $550 – which still presents upside of about 35-40% from here, (and of course long term, i’m definitely a buyer)</p>
<p>of course, as GOOG shares continue to rise, many of these points become moot. it doesn’t change the fact that if you had invested in GOOG at the beginning of the year, you are looking at a nice 40% profit – let’s not completely dismiss that fact.</p>
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<p>Similarly, if you had invested in Citigroup in March, you’d be enjoying a juicy 250% profit. It’s not because Citigroup has become a great company - far from it, in fact. It just improved from “truly zombified” to just ‘plain terrible’, but no matter, for it’s the *relative improvement * that holds forth. </p>
<p>So I return to what I said before: the key to investing success is not to look for strong companies, but rather to look for undervalued companies. A terrible company like C can nevertheless be an excellent investment and the opposite can be true, as in the case of Cisco. Google may well fulfill all of its technical promise but nonetheless still be a bad investment. </p>
<p>But in any case, this is taking us far away from the original point of discussion, which is to debate the merits of choosing HBS vs. Stanford GSB. At this time, I think we all have to agree that HBS has a name-brand edge over Stanford. Sure, I agree that in the future, that might change, but there is no guarantee that it will. Lots of things might change in the future, but then again, they might not. All we know for certain is what is true today, and today’s data tends to be a more reliable indicator of what will happen tomorrow than is any other conjecture.</p>