Google Takes Top Spot From Time Warner

newfoundry writes "BBC News reports that Google hit $80bn on the NYSE yesterday, so is now worth more than Time Warner..."

Comments

Google is great!

[rice_burners_suck]

I am glad that a company that "does no evil" is better off than a company that does nothing but evil. That only goes to demonstrate the power of good.

Google is truly a remarkable company. Innovation at its best... There's probably not a day in my life that I don't use Google at least ten times. I don't know where I'd be without it. One day, I aspire to work for Google myself... Keep up the good work, guys.

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Re:I think this calls for a googlegasm

[Karzz1]

This is not really all that surprising. Google has developed a loyal following amongst its users by:
1. Not suing their customers
2. Providing value (not a bunch of recycled crap)
3. not being evil.

I am sure there are many more reasons why Google is a "better" company than Time-Warner, however they escape me right now (disclaimer I am very tired and recovering from strep throat).

Re:Allow me to rephrase

[Democratus]

"Some people think it's worth more than Time Warner."

Isn't that the very definition of worth?

Value only exists as an expression of people's faith.

Re:More than TW??!!

[MoonBuggy]

As another poster said, Google's got server farms and related infrastructure that aren't exactly worthless, but they are obviously barely a drop in the $80bn bucket. Having said that though, Time Warner is also an IP company. Physical DVDs, film reels etc. aren't worth too much really - it's the IP that you put on them that people are paying for.

It's still overvalued, but not necessarily for the reasons you said.

I want what they are smoking.

[Shivetya]

The P/E is already 111. So they think it can bear getting even higher? This sounds like investment house pump and dump, stuff we saw at the end of the 90s with the Internet boom.

Google would be foolish NOT to buy out companies using stock. Companies would be foolish to accept that type of buyout though.

As someone else said, some people think it is worth that much. Once the honeymoon ends we might see realistic values which I suspect are a third of what it is now.

Re:I think this calls for a googlegasm

[anaesthetica]

The most amazing thing about this meteoric rise is what it says about a capitalist society. We hear a lot of moaning on Slashdot and elsewhere about how the Big Corporations are going to be around forever, and buy up every other corporation, and kill innovation. What people consistently fail to realize is that small companies are constantly rising up to destroy the old ones.

If you look at the list of the top 100 companies from 50 years ago, a majority no longer exist. If you look at the top 100 companies from 100 years ago, maybe, maybe 5 are still around. All the "big" corporations of today are supremely mortal. And their biggest vulnerabilities aren't to their main competitors, but to the small innovative start-ups, like Google.

Think about it: these two guys did some groundbreaking research, built something useful around it, and tailored the technology to their consumers needs. Now they are the highest valued media corporation, bigger than the goliath consolidated media giant AOLTimeWarner. Suing one's customers, buying Senators to write legislation for you, and being generally evil are not signs of impending oligopoly, but signs that the old dinosaur companies are going down the tubes, and will be devoured by a new wave of small companies.

Re:I think this calls for a googlegasm

[fireboy1919]

Yeah, and what's great about the universe are:
1. Time
2. Space

Your #2 and #3 are broad, far-reaching categories that actually contain numerous reasons why Google is a better company. #1 is actually part of that, #3, by the way.

I would change #2 to be "providing services their customers want."

There are doubtless many manure companies that consider recycled crap to have lots of value.

Re:Allow me to rephrase

[HermanAB]

Yup, some 2300 years ago, Democritus said: A thing is worth whatever someone is prepared to pay for it.

Except that he said in Greek of course...

Economists have been struggling with that concept ever since, but the simplest trader in a bazaar (ancient name for stock market) understands it perfectly.

Re:I think this calls for a googlegasm

[NoMoreNicksLeft]

I think you misunderstand. We don't rail against the eternal corporation, they do indeed die. Often times, this is not a good thing though... it usually means they were killed by an even worse corporation. It's like locking 1000 psychopaths in the room with guns and knives, the ones that are left are the *worst* of the bunch.

All you are saying is that some of the psychopaths are female also, and assuming that they fuck around enough, babies are born. Gee, I wonder how that kid will grow up, eh?

The incredible thing here, is that with Google, that analogy has failed. Here's a company that at least as of now is *not* a psychopath. Some of us are so cynical wonder if it is one, but hides it well, others figure it's only a matter of time before it becomes one even if it isn't already.

This isn't a shining example of the success of capitalism, rather, it's an exception to the rule. Capitalism shouldn't be a religion, the invisible hand might have been gentle at one time, but now it rarely ever even gives you a reach-around.

Re:How much further until they surpass Microsoft?

[tshak]

Microsoft's market cap is about 275 billion, so Google still has a long, long way to go.


Not to mention Google's P/E is almost 5x of MSFT's - this means that Google will most likely not be able to sustain this value, let alone gain anytime soon.

Let's look at the numbers....

[SurfTheWorld]

Google's market capitalization has nothing to do with being "worth" more than AOL Time Warner. The fact that Google has issued more stock and has a higher stock price than AOL Time Warner only means that Google has more publicly held debt. That's all stock is: publicly held debt.

Like privately held debt, Google must pay interest on the stock they issued. Those are called dividends. Additionally, Google may have to buy back shares at some point. Stock != value. Stock == debt. Earnings == value. Plain and simple.

From an investment standpoint Google is a tulip bulb. Let's compare the financials of the two companies at a macroscopic level.

TWX: Price of $17.08 on $0.73 earnings per share, giving a PE of 23.41.

Google: Price of $282.30 on $2.50 earnings per share, giving a PE of 112.92.

Simply put, Google stock is 112.92 / 23.41 = 482% more expensive than AOL's stock.

If you had $100 to invest TODAY, and your investment horizon was 1 year, and you had to choose between AOL and Google, this is how it would work out:

AOL: $100 at $17.08 / share = 5.85 shares. 5.85 shares * $0.73 earnings per share = $4.27. This is a 4.27% rate of return.

Google: $100 at $282.30 / share = 0.35 shares. 0.35 shares * $2.50 earnings per share = $0.88. This is a 0.88% rate of return.

The only way that Google can "even the score" and become a comparable investment would be either for the earnings per share to rise. The price of $282.30 is not sustainable given Google's earnings, and if you think that Google's stock price will continue to reside north of $200 you're smoking crack.

I'll continue to pick on Google financially and point out that in the state of Maryland, you can open a savings account at Bank of America where the annual interest rate for an account with $2500 is 0.55%. This is better than 0.44% and is insured money.

I love Google and think they provide wonderful services on the web. But as a financial investment I'd rather place my testicles in a vice and ask someone to squeeze rather than purchase their stock.

-c

Re:Let's look at the numbers....

[flanman]

I think you've been misled, stock != debt

While there are share issuances that act like debt such as preferred shares that have a financial obligation from the company, not all shares have a cash value on them.

Preferred shares generally have a fixed time to live and are "bought" back by the company at a future date (paying off the principle) with a fixed debt servicing cost (usually a dividend).

While the common shares of a company may be evaluated with EPS or EBITDA or whatever, the shares could be reduced to 0 value (or infinite value) without a direct consequence to the issuer. (without the implied challenges/opportunities to raising additional capital)

That's why some stocks, like google's, trade at significant multipliers to their actual earnings (exactly what happened in dot bomb) based on the "expert's" view of where the company's earnings would be in the future.

This is a dangerous game as we all know.

Re:I think this calls for a googlegasm

[dustman]

Something to think about here is Wal-Mart.

Wal-Mart started out as a single store with a dirt floor (!). It was run extremely well by Walton, and he clawed his way to the top of an industry, beating out many established players.

While Walton was still around, Wal-Mart still seemed to have a heart. Now, it is hard to find a better example of the "soulless corporation" than Wal-Mart.

What's going to happen to Google when its "don't be evil" founders cash in their stock or retire?

Re:I think this calls for a googlegasm

[anaesthetica]

That's exactly right. Google is growing right now, and it's buying other companies so that it can amplify its fundamental innovation (search) using the small companies' innovative products (picasa, keyhole, etc).

It's not trying to buy startup competitors, which is what large declining un-innovative companies do when they're on the defensive. When google starts buying other competing search companies, we'll know they've jumped-the-shark.

You're absolutely right that in 10 to 20 years we'll be talking about the new company that can make Google irrelevant. Many people on Slashdot talk about Google being the Microsoft killer. At first, it sounds odd: how can an OS/Office Software company be killed by a web search company? But when you realize that Google's innovation has started a trend which could make rich client software companies less and less relevant, you begin to realize that direct competition is not what kills corporations, but asymmetric competition that makes them irrelevant. I give 100:1 odds that the Google-killer will not not be a search company.

Re:I think this calls for a googlegasm

[maxpup979]

This is an excellent example of what happens when the founders of corporations die off--generally leaving their empire to their kids. I have worked for 2 large companies, that were fantastic, wonderful places to work. Until the founders kids took over, and turned them into horrible employers. power with no sense of accomplishment, or responsibility is a bad thing...