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  • xxchicagobadboyxx xxchicagobadboyxx Apr 17, 2008 5:34 PM Flag

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    STANDARD AND POORS ASSESSMENT:

    We believe that gross revenues increased 57% in 2007 and will rise 39% in 2008, with revenues benefiting from higher spending on Internet advertising, the appeal of keyword search advertising, market share gains in some segments, new offerings, and international expansion. Revenue increases should continue to be paced, in our views, by revenues derived from GOOG's Web sites. We anticipate that GOOG will employ some of the proceeds from stock sales, including its IPO for investments in, and acquisitions of , businesses and companies.

    We believe competitive pressures and broader concerns about GOOG's power could detract from revenue growth. However, we are constructive on GOOG's efforts to broaden its offering in Internet video and display advertising, but believe it is paying excessive prices to do so. In November 2006, GOOG acquired YouTube for $1.8 billion in stock, and in April 2007, it announced the proposed purchase of DoubleClick for $3.1 billion (we foresee deal consummation possibly by mid-2008, pending approvals).

    Our relative P/E analysis leads to a value of around $575. Comparable PEG considerations result in a price assessment of about $840. Our DCF model (assumptions include a WACC of 11.2%, five-year average annual growth of 41%, and a perpetuity growth rate of 3%).

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    • STANDARD AND POORS ASSESSMENT:

      We believe that gross revenues increased 57% in 2007 and will rise 39% in 2008, with revenues benefiting from higher spending on Internet advertising, the appeal of keyword search advertising, market share gains in some segments, new offerings, and international expansion. Revenue increases should continue to be paced, in our views, by revenues derived from GOOG's Web sites. We anticipate that GOOG will employ some of the proceeds from stock sales, including its IPO for investments in, and acquisitions of , businesses and companies.

      We believe competitive pressures and broader concerns about GOOG's power could detract from revenue growth. However, we are constructive on GOOG's efforts to broaden its offering in Internet video and display advertising, but believe it is paying excessive prices to do so. In November 2006, GOOG acquired YouTube for $1.8 billion in stock, and in April 2007, it announced the proposed purchase of DoubleClick for $3.1 billion (we foresee deal consummation possibly by mid-2008, pending approvals).

      Our relative P/E analysis leads to a value of around $575. Comparable PEG considerations result in a price assessment of about $840. Our DCF model (assumptions include a WACC of 11.2%, five-year average annual growth of 41%, and a perpetuity growth rate of 3%).

 
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