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

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: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: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.

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: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...