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Subpoena Resistance Hurts Google Stock
imrec writes "Google stock sees a record 8% decline shortly after news concerning the government's request for Google's search logs broke earlier this week." From the article: "'There are potentially concerns that Google could be in the cross-hairs of the Justice Department,' Kessler said. 'Investors are worried about interest rates and inflation and they felt technology stocks like Google, Apple, Yahoo and others were able to withstand these kinds of pressure. But now that ability is in doubt,'"
Going public was a double-edged sword for Google. While Google performs and the stock performs, the shareholders aren't an issue (pretty much up until now). Google's "Do No Evil" is really out of their control now. A bunch of short-sighted bottom-line investors are in control of it now. Google can manage to take a hit here and there, but if this thing of the DoJ gets out of hand, Google's whole culture may take a change for the worse when the shareholders want their pound of flesh.
Have you taken a look at what Googles PE multiple still is, and what that means?
With apologies:
Those who don't understand the DotCom bubble are condemned to repeat it. Badly.
Google does something that is bound to endear them to their audience, and thus bound to increase their "ratings" (page views), and thus bound to increase click numbers for their customers, and so bound to increase their income - and their stock goes DOWN? Once they get a court order, they'll give up the data, sure, but the cost of fighting the supoena is nothing compared to the good will their resistance to releasing user data will garner. I don't think these investors really understand what Google is selling.
... the stock was simply highly overpriced and the markets made a first adjustment!!!
I think Google did the right thing.
Google is a marketing and advertising company. First, foremost, and mostly only. The don't be evil thing is superb marketing that gained them a groundswell of grassroots support, good for them. But their stock in trade, the tins of beans on their shelves, is consumer data. This information is their livelihood. the only reason they are resisted government requests for this information is because they don't want to give up their hard won and very valuable data. Plain and simple. Once it gets into govt hands, who knows where else it will go?
This is not ethics or morals, its like asking walmart to give up their entire inventory of shop-brand cola forever, while still buying it in. That's google's position, so spare us the hero stuff. (Shakespeare?!?) I fully expect this to be modded into the topsoil by the cleansed of brain, but honestly, this is slashdot. Three strangers disagree with you and you're meant to feel bad?
What he can't kill, he has sex on. Trent.
While that seems reasonable, that's not really what the gov wants. After all if they make a clear request for a particular statistic, the answer may not actually support the position they're taking.
Remember, this isn't just a fact finding mission for the gov. They want "evidence" to support a restrictive law. They want the raw data so that *they* (not Google) can rake through it and find any statistic that might support their position. If such data doesn't exist, then they just won't use any of the info, and the fact that the data doesn't support their argument can be easily swept under the carpet. If Google does the analysis, the results will become known to the public whether the gov likes it or not.
You forgot the ending: Buy Now...if you want to lose a lot of money. There's a reason a stock drops that much on news like this - it is widely overvalued due to speculation. While I agree with a contrarian approach, there's better ways to do it than buying Google stock.
The tech sector was especially hard hit. Intel, Apple, and Yahoo, who according to slashdot did comply with the investigations, all took a beating. This story is nothing but FUD, pretty standard stuff here on slashdot.
Monstar L
Here's two other words (echoing an excellent investment tome): Irrational Exuberance
We have't gone to a three year presidential term. The President was innagurated for a second term on 1/2005. He won't leave office until 1/2009. He has three more years in office.
Damn, that's civilisation down the pan, then. With Bush in charge, 2009 is likely to start with us being drowned in our nuclear shelters by the rising sea, while government helicopters hover overhead shooting dead anyone who scrambles out, because only a terrorist music pirate would try to run away from the wrath of the One True God.
GOOG is just following the market down. Every time the market moves, the analysts have to come up with an explanation, which is almost always bogus.
It seems extraordinarily clumsy of the Justice Department to subpoena this information from the search engines. First and foremost, by what right can the US government require confidential information from a company or person when there is no criminal action contemplated? The fourth amendment protects against unreasonable search and seizure, and this seems to be just such a case.
Fourth Amendment
Second, the traditional way for the US government to get this kind of information is to fund a 'study' and pay the web search companies for a series of analyses on a given topic of interest. The companies get to keep their methods confidential, get some return for their trouble, and the government has the benefit of expert analysis. Is this ethical? I'm sure Google and the government could agree on a degree of data anonymity that would satisfy both parties.
In this specific case, it appears that the government is trying to access data that isn't going to satisfy their objective. By being confrontational, they aren't going to get the benefit of Google's guidance.
Finally, it's pretty cynical to try to extract this information under the guise of combating child pornography. They are trying to get their nose in the tent using an issue that no one dares to counter.
The request is not perfectly reasonable. The government is asking for lots and lots of data from Google to support their argument for a bill.
I don't know about you, but there is absolutely no possible justification for this. A subpoena is meant to compel testimony in a court proceeding, not to steal data on your citizens for the soul purpose of possibly justifyiny a conclusion you made based off of hyperbole.
The Yasashii Syndicate ||
I think the bush administration has already lost.
The kind of McCarthyesque trend that the bush administration has been promoting tends to fall apart when the people get tired of it and someone very publicly stands up against it.
Gonzales might have gotten away with this in the post 9/11 hysteria.
Now, years and broken promises later people are tired of it all.
Gonzales already lost it for the bush administration by having Google tell him "No".
If he pursues them in court he will just draw more public attention and outrage to the situation, worsening the bush administration image with every public word that is spoken about it.
A PE ratio has nothing to do with splits or adjustments. It's market cap (price * shares outstanding) divided by earnings. Here's the math to compute MSFT's PE ratio:
Price [26.41] * Shares outstanding [10.64 billion] = Market cap [281 billion]
Latest-year net income = $12.254 billion
Market cap divided by net income = 22.93 = PE ratio
Bill Clinton: Pimp we can believe in. - The Shirt!!!
People often expect doing the right thing to be rewarded. In my experience, it is usually punished, often harshly.
"Stop Searching"
Forget the stock price, do you approve of the government looking into your searching habits? I dont.
Remember when it was said ' they would never do that' just a couple of years ago when echelon was all the talk? Welp, welcome to 'never'.
---- Booth was a patriot ----
All -
This article really overstates things. Google - at over $400 a share - was significantly overvalued on a Discounted Cash Flow(1) basis. At just(!) $300 a share, Google would have to grow at its current rates for 5+ years to be fairly valued.
Let's be clear here, I believe that Google is a great company (and living in Mountain View, am looking forward to their free WiFi for our community) and will continue to influence the business world, our society, and culture for a long time to come. But I also can see when a company is overvalued. At between $100-$200 a share, Google would be fairly valued.
Google has been - and still is - in a bubble. As we say in 2000/2001, a small event can puncture a bubble and cause a stock to drop in value. The DOJs subpoenas may just be the event that puncture's Google's bubble.
Yours,
Jordan
1. Discounted Cash Flow or DCF is the sum of all future cash flows discounted back to the present. It is the best way to get an intrinsic value for a stock.
Ideally, you wish to purchase stocks of companies trading below their intrinsic value. Of course, buying below intrinsic value is as much art as science, but it is possible.
The lesson I learned in 1999/2000 is that EVERYONE knew that the market could not sustain those levels. But people put their money in anyway, because they thought it would go up for a while longer, and they wanted to gamble on getting out on time.
Everyone knew the market would deflate eventually. The most pessemistic said it would go down by 50%. Then start to steadily climb again. Since I was in for the long term, I figured I could handle a temporary dip, even on that scale. However, most of my stocks didn't go down by 50%. When they passed that mark, I bailed, and still made a profit - just not the profit I had hoped for. Most bottomed out at about 1/10th their peak value. Most have not gone back up - most have been absolutely flat under George W Bush's "growth and jobs inspiring tax cuts" - for 5 years. (If you look at a graph of most indices over the past 10 years, yesterday was a mouse-fart).
Then I heard a repeat of the same crap - in the housing market. Everyone knew the bubble was not sustainable, everyone knew it would drop at some point, the most pessimistic analysts have said that maybe prices will level out for a few years at worst. I'm expecting huge drops. Like most Americans who are making payments on a single home, I'll be fucked. 11% drop in November. 9% drop in December.
At least I have my health. . .
These are my friends, See how they glisten. See this one shine, how he smiles in the light.
No true at all.
Lets say company X has a share price of $100 and a market capitilization (total 'worth') of 1 billion dollars. The current shares outstanding is 10 million ($1,000,000,000 / $100).
They decide to split. Now company X has a share price of $50 and 20 million shares outstanding. However, the market capitilization is unchanged. X is still worth 1 billion dollars overall.
Lets suppose you can currently only afford 1 share of Google stock at $400. Now lets suppose Google where to split 3 times, taking the price from $400 a share to $50. Now you can buy 8 shares! Yet the total market value of Google remains unchanged.. so even though you own 8 shares they are shares worth 1/8 of the original price you could have bought before.
The decision to split a stock is pure black magic. Often a company will split to make the stock more affordable to smaller invsetors, but only in the sense that the price has become so expensive they won't even buy ONE share. Splitting doesn't change the fact that they own only a pittance in the company, but it does at least make it possible to own that pittance.
It is also common for a company to split to increase its own float of available stock for employee compensation and the like.
*note: I recognize that the above is simplistic. I also recognize that companies do tend to see a bump in overall valuation on a split, but over the long term the market cap tends to adjust to its proper levels. But I do think the overall point remains valid.
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All of the financial markets are based on a simple concept. It is the "some shmuck" theory. It goes something like this. I buy X and I buy it under the belief that "some shmuck" will buy it from me later for more money. The company performance, world economy, etc, do not matter. All that matters is the ability for you to find another shmuck.
Think about it for a moment. After the IPO for a stock is over, what value does a share of their stock really have if they don't offer a dividend? If the company is worth $200,000 or $200,000,000,000, the stock's value is completely arbitrary based on the number of shmucks lined up to buy it.
Good example: VA Linux. At IPO it went from $30 to $300. Why? There were a lot of shmucks who wanted it. They wanted it because they thought some other shmuck would but it at $400. As it turns out there were no such shmucks.
The housing market is the same way right now, though a bit different because everybody has to live somewhere. So there's a definite value in property other than the "some shmuck" value. Having said that, you know there's a lot of people buying $500,000 postage stamps on the assumption that some shmuck will pay them $600,000 or a million.
Of course, eventually, you run out of shmucks. You can tell when a crash is coming because everybody you talk to talks about whatever the hot commodity is at the moment. Suddenly everybody's a dot com developer, or they're a realtor making scads of money. They talk about how housing prices always go up 5-10% year (even though incomes have dropped relative to inflation for the past few years). They say crazy things about how we've eliminated the business cycle and we'll have steady low inflation growth until the infinite future. Then he shmucks run out and it all comes crashing down.
This sig has been temporarily disconnected or is no longer in service
I had a private eye contact me because a young runaway teen (~15 yo) was using my e-mail services. I had previously enabled all logging (another fun story) and so I checked the logs, verified the story (I also found the kid listed on the missing and exploited children website) and tracked down where the kid was. I call up the private eye and not too long later the kid was returned home.
One could bitch about privacy but frankly the safety of child is a little more important. Nobody but me read any of the logs. All the PI got was an IP address that ended up verifying his hunch.
I think Google should consider the consequences of NOT using it's resources to save children.
If Google both refuses to offer up it's logs relevant to people searching for child porn AND refuses to do it's own investigations and reporting to the proper authorities then Google is allowing evil where they could easily do something about it.
And that quite simply is pathetic and I wouldn't be surprised if their stock continued to plummet. Instead of "Do No Evil" their motto would degrade to "Be Apathetic To Evil"
Sure the child porn people could do their searches elsewhere but with years of backlogs, it's a little late for a significant number of them. Google no doubt also has a cache of numerous child porn sites which could be used as evidence in trials.
The other fun story I mentioned earlier resulted in a dead end because I traced the alledged criminal to an ISP in the UK which refused to do anything about them. Later their account at the ISP was disabled so the authorities may have knocked some sense into them. In the meantime I had to call people up myself (I bet you can guess what was being stolen) and let them know what happened.
It would be pretty stupid of me to ignore the fact that people's information and SSN numbers were being stolen simply because of a privacy statement. I think people would rather not have their identity stolen when someone with a simple phone call could have prevented it or at least mitigated the damages.
Imagine brick and mortar stores allowing customers to commit criminal activity within their walls and then hiding them behind a privacy statement or defending their blindness to it because of a privacy statement. That is exactly what Google is doing. And it is indefensible. If you try to develop child porn photos at a store you will be reported by the store to the authorities. What makes Google so special? Right now they sound like every other company that doesn't care two cents about its customers.
Yes they have a lot more data making it more difficult to find the things I easily found but that's what the government is for.
Work Safe Porn
The stock goes down because the rest of wall st is taking a beating. A publication owned by Rupert Murdoch blames googles stock price drop on it's refusal to obey a silly order from the Bush administration.
Looks fishy to me.
evil is as evil does