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  • talentedbh talentedbh Sep 19, 2006 6:55 PM Flag

    Why GOOG is in danger of fall?

    While you make valid points. GOOG is on earth and you have outlined a legitamate point of view.

    However I would like to point out a few things since I work in the Media industry that might help you understand the enviroment that GOOG is in.

    1) While marketing budgets may be reduced for a lot of mediums. Media marketing dollars are moving to the internet as a medium of choice for advertising not away from it.

    2) In the current economic times the trend in media is to 'reduce' the total number of outlets used and put more dollars in to fewer medium/media choices to gain better leverage. GOOG will far out distance YHOO in this area and will gain market share based on the current field

    3) Yahoo's loss of financial revenue can be traced directly to the Message board relaunch being a failure which has reduced page views and visits.

    4) Automotive is a little bit more a question mark. A lot of automotive ads use to be run on the Message boards so loss of revenue due to a decrease in page views would seem to make sense. Grant automotive dollars 'dried' up on $3.00 gas however it did not go away completely.

    5) Bottom line is annual revenur will be over $10.00 per share with growth. Cash on hand equal to approx $32.00 per share on hand and generating another 2.50 every quarter.

    GOOG will have to be come even more creative and aggressive with the cash sitting on the balance sheet. The cash will give it the ability to make things happen quicker, faster and on a grander scale.

    GOOG can grow organically or through aquisitions, either way, you could see a 25% move in the stock over the next 60 days.

    Money will move to winners and leave losers....

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    • A simple math is: the bigger GOOG becomes, the less the growth rate it can achieve. People who bought GOOG today and expect 25% growth will be less likely to get that than those who did last year.

      Size matters. And GOOG is being pushed to a level where there will more disappointments than pleasant surprises.

    • Regarding point #5. Google will be lucky to produce 1.5M in Free Cash Flow (Operations less Cap-Ex) for 2006. That works out to be about $5 / share which results in an ultra high FCF ratio of 80:1. Not good.

 
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