Google Fundamental Report

With Google (GOOG) being the number one search engine, as well as a powerhouse in mobile technology, and nearly anything of an internet-related product, the decline in its stock over the past few months has come as a surprise to some investors and financial analysts. This has raised the question, is this just temporary or is this is a sign of the dark times that lie ahead for this company?

Last April, Google announced a new device that it has been working on. Called "Project Glass," the project is a pair of eyeglasses that has the capabilities of a Smartphone. This project, however, is still in the early stages of development and Google has unveiled it only to gather some feedback from its target audience. As expected, this futuristic device has received a lot of positive feedback from consumers who can't wait to get this amazing technology in their hands- a sign that when this project is finally released to the public, it may give Google a huge boost. The development of Project Glass is slow, with Google making sure to keep its press spread out and managed. Still, some wonder if this is the only thing on Google's horizon to save the stock from stagnation. In my opinion, this is wrongful thinking - as Google has been busy with acquisitions and other developments.

Just recently, Google has made another announcement, which is the acquisition of Meebo, a social platform that connects thousands of users on the internet. This program supports Face book (FB), Yahoo! (YHOO) Messenger, and Google Talk to name a few. But how will this affect its performance in the stock market? Well, it actually had an immediate effect on the stock. Just after the announcement was made, its price shot up 1.3% (no small feat when shares trade for as high as they do).

This is basically a way for Google to counter Face book or to compete with the company by continuing to develop Google Plus. But as you already know, Face book has already gone public last month and its stock has struggled, to say the least. But in Google's case, this is not really its main concern. The decision or the motive behind buying Meebo stems from the goal of snatching away the more than 1 billion Face book users and lure them to use Google Plus instead. After all, Google has shown that it is more apt in turning profits from advertising than Face book is, and with the increase in users, the competition would really be muted. The question for Face book remains how to make money, the question for Google is how to grab users.

Moreover, with regard to the acquisition, the Google team also wants to acquire the pool of talented developers that work for Meebo to actually help it create a powerful social networking site in Google Plus, as clearly its plans so far have been unsuccessful.

And when it comes to building internet relationships, Meebo is not a company to be underrated. It has reportedly earned more than $70 million since the company came into existence in 2005. Furthermore, Meebo has a positive reputation that can bring more credibility to Google Plus. And, with what's happening to face book right now, it is expected that by the end of 2012, there will be more users on Google than on Face book. The question, then, is how active these users are on the sites, a point in which Face book still has a clear advantage.

Google's acquisition tear hasn't stopped with Meebo, just as it didn't stop with its taking over of Motorola earlier this year. Google recently bought the Mobile Transmit Delivery (MTD) patent portfolio of Magnolia Broadband, a move that continues along the trend of large tech companies buying up patents to secure its own standing, as well as give it an offensive possibility in future court cases. Already this year we've seen Google defend itself in court as well as take other companies to court over patents (the Oracle (ORCL) case being the biggest, in which Google emerged as the victor), and with the ambiguous lines in technology these days, this trend could go on for years to come.

In its other arenas, Google has managed to extend its search engine lead over competitor Yahoo! and any other search engine websites out there (with the exception of Baidu.com (BIDU) in China). The search engine aspect has long since been the driving force behind Google stock, yet it remains the calling card of the entire operation. Recent news has broken with some uncomfortable news regarding Google's search engine and the power it wields. Google has reported that in just the last six months it has received over 1,000 requests to remove content from governments. The news is unsettling not only because it challenges the free speech of the World Wide Web, but also because Google has become the singular go-to point for contention between large government institutions and people like bloggers, video posters and analysts.

The censorship is expected with Baidu's filtering of search results, but the large amount of requests that Google handles is something of a shocker. The worry here is twofold: the fear of either the large institutions turning on Google for its refusal to censor, or the turning away of users who believe Google is acting as a proxy for those trying to limit speech. Either way, this is a perfect example of the problems that come with power. Google, being as large as it is, will have to deal with issues like this moving on, and the handling is particularly tricky.

Watch Google's developments closely. At this point, the company is so large that some setbacks will obviously occur. However, with projects on the horizon and acquisitions opening new doors everyday, Google should continue to make its investors happy

 Asad Khan
Financial Analyst  (CFB)
050-8774861
asad@cfb.ae