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,'"

Comments

Google will ultimately have to bow to shareholders

[Bloodwine77]

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.

So let me get this straight . . .

[kalidasa]

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.

It has very little to do with that ...

[xdesk]

... the stock was simply highly overpriced and the markets made a first adjustment!!!

For christs sake

[Darkman, Walkin Dude]

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?

Re:For christs sake

[NickFortune]

The don't be evil thing is superb marketing that gained them a groundswell of grassroots support, good for them.

Speaking as a grassroot, I thought the thing they did was to offer efficient, reliable and honest search results with a minimum of annoyances for the user. I'd been using Google for years before I heard about the "don't be evil" thing.

And, you know, long as I find Google's search results useful, I expect I'll carry on using them.

Re:Nonsense.

[antifoidulus]

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.

Re:Two Words . . .

[squidguy]

Here's two other words (echoing an excellent investment tome): Irrational Exuberance

Re:How is this request an invasion into users priv

[Nicholas Evans]

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 bush administration has already lost.

[beforewisdom]

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.

Two other words..

[nurb432]

"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'.

Really overstating things...Google was overvalued

[jordandeamattson]

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 "some shmuck" theory

[sterno]

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.