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

Two Words . . .

[Newt-dog]

Buy Now!

Re:Two Words . . .

[ceeam]

Yeah, using /. for stock market advise is about as insightful as using it for pickup/sex tips... In other words it's on par with asking a blonde whore about Linux configuration, yeah.

Re:Two Words . . .

[squidguy]

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

Re:Two Words . . .

[Red Alastor]

Professional analysts don't know anything.

But they can tell you tomorrow why what they predicted yesterday didn't happen today.

Re:Two Words . . .

[jmorris42]

> 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.

And this is exactly why Google is dipping now. Nothing at all to do with the Justice Dept. The moron writing that Reuters story was looking for something to sex up the story a bit and Slashdot bit hook line and sinker. Bottom line, the stock markets in general did a major dip and Google felt it harder than most because it is such a spectulative stock. It's current market value is so imaginary it recalls the heady days of 2000 right before the bubble burst. Since most investors remember losing an assload when that bubble burst they are a little more jittery this time. But not enough since they are still in Google so heavily.

Look, I like Google. If I could have gotten in on the IPO I'd have been there. But by the time mortals were allowed in the price was insane and heading higher. It is priced like it was already as big as Microsoft and poised to grow. Sorry, Microsoft isn't even growing anymore. No company the size of Micorosoft can, not even Google.

> 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.

Bush has little to do with it. At 1/10 their peak value they are pretty much priced fairly, which is why they aren't going back up all that fast, in fact they now rise based on expected growth. Imagine that. Sorry, Amazon's couple of warehouses just doesn't represent a greater capitalization than Boeing. And even if Amazon sold every book printed neither their revenue stream or likely profits would approach Boeing's. The market finally came to its senses and revalued those Internet stocks that had truly silly valuations.

But since you bring up Shrubbie, I'll just note that normally when the stock market tanks like it did in 2000 the economy does a much bigger nosedive than it did this time, even without an added blow to investor and consumer confidence such as 9/11. So I'd say the prompt application of tax cuts probably saved the day.

> 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.

Again, if you bought in one of the insane housing markets (So Cal for instance) you are probably going to get what you deserve. After all, you KNEW it was insane and you bought anyway. But then on the other hand, if you actually plan to live there it really doesn't matter what the paper value is now does it? Heck, it will at least lower your property taxes. And in ten or so years when you are ready to sell the value will probably have recovered a bit.

Google should stick to "not being evil"

[Ckwop]

Ahhh, now we'll really see whether they can really live up their "Don't be evil" policy! Does Google prefer stock price over ethics? While my instinct tells me the answer is firmly "no" I think we are all interested in the result.

I think Google did the right thing. In the western democracies we all have strict rules governing the powers of the various investigative authorities. There are very good reasons for this. The Police and Justice Department have incredible powers granted to them by the state. However, the same power that allows them to catch criminals can also be used for less noble purposes.

In any organisation of considerable size there is always a rogue element. An element that is deceitful, unethical and motivated by influences orthogonal to the goals of the institution. Sometimes these are fairly benign: David Blunket trying to get a quick visa so he and his bit on the side have a nanny to look after their child. Sometimes these can be very malicious: Robbers breaking in to the Democrat headquarters and planting bugs so Nixon could spy on their election campaign. (I'm British so they may be inaccuracies in this account)

The law is there not only to protect us from criminals but to protect us from the people who catch them too. In many ways, the protection from the people who catch criminals is vastly more important than protection from criminals. What criminal can get state sanctioned approval to search your home? Impound your possessions? Wrongfully impression you?

All over the western world, governments are granting their Police more and more powers in the name of combating terrorism. The chance of being killed by a terrorist is approximately zero. For comparison, in Britain 0.03% of us will die[1] in ALL possible mishaps this year. That takes account of murder, car crashes, being eaten by ferocious llamas and so on and so forth.

I would therefore venture that the threat posed by increasing Police power is vastly greater than the threat of terrorism. In Britain, we saw this illustrated for us nicely when an octogenarian, life-time member of the Labour party was escorted from the annual conference and arrested under anti-terrorism legislation. Here was a man saying that war in Iraq was unjust and he gets arrested under anti-terrorism legislation. This war on terror is becoming a war, conducted by ourselves, against ourselves to remove the democratic values we cherish so dearly. Shakespeare himself could not write such a dark tragedy.

Getting back to point. Just because the Justice Department says Google should jump it does not mean Google should meekly reply: "How High, Officer?". Just because the government asks you to do something does not mean that they have the proper authority to ask for it. Let them prove in a court of law that they have the proper authority to make such a claim. If they're right, they'll win and Google will have to capitulate. If they're wrong, then a precedent is set and the complicated system of checks and balances has once again protected liberty.

Simon

[1] - The Independent, Yesterday, in the Editorial section. Feel free to correct this figure if it is incorrect.

Re:Google should stick to "not being evil"

[freedom_india]

On the point.

There is HUGE difference between the Government and the Law.

Law is NOT made by Justice Department.
Google is right in standing up the Republican Justice Dept and saying: "Here's my middle finger. You can lick it or you can screw yourselves with it."

Obviously, the request was made by justice dept. not for fighting terrorists, but just to "help" other campaign corporates like MSFT to learn Google secrets.

This government is for criminals, by criminals (DeLay, Jack Abr.., etc). and for the criminals.
Since when do we start listening to criminals and reveal our business secrets to them.

Just TWO more years Google. Hold On !!!

Easy Fix

[Heliode]

All Google needs to do is rename itself to Freedom Search, and all will be well...

Nonsense.

[jcr]

The whole market's taking a hit from the Nikkei scare, and the oil prices. I doubt that most of GOOG's investors even know that there's any issue with the DoJ's unreasonable demands on Google.

-jcr

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.

This is FUD

[SpaceLifeForm]

The entire market was down. Granted, not 8%, but to attribute
the decline in the Google shareprice because of the DOJ action
is silly.

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.

Google stock down

[StarCharter]

This is just flat wrong! Google's stock got clipped because the whole market went down. Investors are worried because the price of a barrel of oil went above $68 a barrel, the Nikei exchange tanked, and several Big Names reported shortfalls. Target buy prices from wall street analysts rangfe fromn $480 to $560. I wish I had a couple of million to put into this "flawed" stock! I expect to see Google at $500 before the end of 2006.

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.

Don't be retarded

[HangingChad]

From the article: "'There are potentially concerns that Google could be in the cross-hairs of the Justice Department,' Kessler said.

The whole market got slammed yesterday. Google is way out there in terms of valuation and 8% isn't that much considering.

The "Justice" Dept. didn't just go after Google records, they asked all the major search engines. Google just had the nads to stand up and say no.

That's not going to cause their stock to go down, being over-bought causes a sell off, especially when the rest of the market is taking a header. Google could be selling toxic waste and as long as their earnings stayed up the market would still buy their stock. This is nothing more than another example of an over-reaching administration trying to gather statistics to support the conclusion they started with.

I can't wait 'till November.

Re:Don't be retarded

[Mattintosh]

Google just had the nads to stand up and say no.

So did AOL, apparently. AOL's response was something along the lines of "Here are our already publically-available usage stats. Enjoy." In other words, AOL also told the government to pound sand. At least, that's what I heard/saw on News Hour last night...

Re:Google will ultimately have to bow to sharehold

[A beautiful mind]

You mention shareholders, but as far as I know, the majority of Google stock is in the hands of the founders and the employees.

Anyone got data on this in support/against?

It has very little to do with that ...

[xdesk]

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

Patriot Search

[Grumpy Troll]

If you feel that using Google is henceforth treason to your government then use Patriot Search!

Thanks, your search has been recorded and will be shared with the governments of the world!

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

[segfault_0]

Sounds to me like you dont believe a company can be good under any circumstances if they make money. I think the real question is does capitalism really want "nice" companies. I guess our reactions when we see one, (i.e. supporting them when the government makes ridiculous requests of them), will answer that question wont it? Im waiting to see what we will do, not google.

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:For christs sake

[pomo monster]

Dude, I agree with the other two guys who responded to you in this branch of the thread. And you're an asshat.

You said you wanted an ad hominem, right? :-)

Give Me a Break...

[Comatose51]

The link between the subpena[sp?] and the drop in Google's price is pretty weak. A better answer might be the decline in LiveDoor over in Japan because of securities fraud. Major financial organizations don't buy just a few stocks. They tend to buy quite a few and some do so with heavy leveraging. The collapse of LiveDoor probably jeapardize the liquidity of some of those organizations. To stay afloat they sold off a bunch of other stocks, including Google with its previous $400 valuation. If anyone's interested, read "When Genius Failed" to see a similar scenario like this that happened when Russia defaulted.

Combine that with the Nikkei's drop and higher oil prices, you can see why. Let's not forget people's knee jerk reaction. Also, some people got it on Google not because they believe in its financials or ideas but because they see the price go up and think that more people will pile on -- other people like themselves. They planned on selling as soon as the price start on a major move down. So perhaps the LiveDoor collapse triggered the move. Seeing this, they all tried to sell and thus magnified the change. This kind of thing is very common. Read "The Devil Takes the Hindmost" for some good examples. The phrase means that stock speculators all know that an overpriced stock will come down eventually but they all plan on selling out and handing it off to the next idiot and hopefully the last idiot is the devil. I'm not saying Google is pure speculation but I'm sure some of its buyers were speculators who only looked at the price and nothing else.

In any case, there are much better explanations or theories for the drop than just a little subpena. Anaylsts are not all geniuses, especially the ones that speak to the news media. I mean, if I was a genius and knew what's going on, why would I let other people know? You make money trading because you know or think you know more than the other party.

Google is Horribly Overpriced

[geoffrobinson]

So anything could prick a bubble.

Last I checked it was around 400 a share: http://finance.yahoo.com/q?s=goog

And its market capitalization was around 118 billion dollars. That gives them a P/E ratio of around 88 or 89.

To put this in perspective, their market capitalization, which should be around how much money their business is worth, is about 40% of Microsoft's market cap. And Microsoft is a monopoly sitting on $40 billion of cash. Their P/E is in the low 20's.

Re:Seconding the nonsense crowd

[dangitman]

Their current price is doing a lot to keep small investors out of owning anything but a pittance of Google stock. Does anyone with market knowhow have an explanation for why a company would let it's stock go so high when it will suffer such extremes in value during currnent market fluctiations like right now?

To stop small investors from owning more than a pittance of Google stock.

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.

Re:Google will ultimately have to bow to sharehold

[Rude Turnip]

Specifically, the founders hold all the voting stock of the Company. Everyone else has non-voting stock. Even if other investors hold a large number of shares of non-voting stock, which outnumber the voting shares, they can't do squat. This was a brilliant move on Google's part. Fund the Company like a public one, but run it like a private one (ie with long-term goals and responsibility).

Don't forget the Dow drop because of GE...

[Svartalf]

GE missed their earnings mark for 4Q- I watched as the Dow and to a lesser extent, NASDAQ, went into a short freefall at the time of the financials statement from GE. Nearly everything got pasted in the market yesterday.

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.

intentionally misleading interpritation

[vettemph]

"Subpoena Resistance Hurts Google Stock"
should be:
"Subpoena Hurts Google Stock"

The Resistance is the only reason the stock didn't drop by 20%. Our federal PR machine would like you to believe that the resistance is the problem.

Comment removed

[account_deleted]

Comment removed based on user account deletion

Google said this when they went public!

[dcollins]

Google specifically warned shareholders when they went public that this sort of short-term action was expected in their stock price. And that's why they set up dual-shares such that public shareholders have practically no say over how the company gets run. So if anyone doesn't like it, tough -- go invest in a company that doesn't keep it's word.

From the NY Times:

Wall Street loves Google, but the feeling isn't mutual.

That is the message permeating nearly every page of the public offering statement that Google Inc., the Web search engine company, filed yesterday. In a frank and provocative statement, the company's leaders argued that companies cannot manage for the long term unless investors and analysts have limited say in the way they are run.

In this, they are responding to a widespread belief that investor pressure for predictable short-term earnings growth led many publicly traded companies to engage in accounting gimmickry and business improprieties in the 1990's. Google says that it will not offer quarterly earnings guidance and that it expects shareholders to understand even if it makes unprofitable short-term investments.

"A management team distracted by a series of short-term targets is as pointless as a dieter stepping on a scale every half-hour," Larry Page, one of Google's co-founders, wrote in a "Letter From the Founders." The letter, which appeared at the front of the statement, was signed by Mr. Page and his fellow founder, Sergey Brin.

Many institutional investors may cheer that attitude. But another part of the company's strategy will draw some criticism. Google aims to insulate its executives somewhat from shareholder demands. The company will have dual classes of stock that will give company insiders much more voting power than public investors to elect directors. The company's disdain for the traditional stock offering process is also evident. Instead of selling a small number of shares at a predetermined price, which often stokes demand for the stock when it begins trading, Google will auction its shares to the highest bidders. In that way, the windfall profits from the offering will go to the company and its private shareholders, not to favored customers chosen by Wall Street investment banks. In its registration statement, Google explicitly warns investors not to buy the offering in the hope of making a short-term profit by flipping their shares.

http://www.uazuay.edu.ec/bibliotecas/conectividad/ Google%20Says%20to%20Investors%20Don't%20Think%20o f%20Flipping.htm

Do what now...?

[faloi]

Why not look at this part of the article:

"The most obvious reason were the mixed earnings results from Yahoo," Standard & Poor's analyst Scott Kessler said of Tuesday's disappointing quarterly earnings report from Yahoo Inc

It's not like Google was the only stock to take a dive, the market was hurting yesterday. The Tokyo stocks have been hurting for the past few days (or at least hurting badly). Sure, there could be fear about the Justice department scrutiny. It could also just be that everythings hurting right now. Correlation does not necessarily mean causation (to butcher a phrase).

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.

Yahoo is reason for Google drop

[xswl0931]

Slashdot should not report on things the do not understand (the stock market). Yahoo reported earnings that was lower than expected (they missed earnings estimates). The interpretation here is that the market for online advertising (although Yahoo doesn't rely on advertising as much as Google) has slowed. Google was affected as investors believe that rather than Google (who has not released earnings yet) will also be affected by this and also miss their estimates.

Republicans Creating Bad PR

[TeachingMachines]

All of the news coverage of Google's "slide" is designed to punish Google for their refusal to comply with the wishes of the Republicans... "Release your search data to us or else bad things will happen to you[r stock]." Hopefully Google will hold on for the ride.

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.