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Saturday, October 21, 2006

Google keeps beating expectations

Google's $1.65b purchase of YouTube seems to be in the news a lot. Am quite surprised that a simple website that users use to upload their videos has gotten such high valuations! To be honest, I have been amazed at the success of Google, judging by its high stock price. I never thought that its stock price could go so high.

When its IPO came out in 2004, I thought paying $85 for a company like Google which primarily relies on searches and ad revenues was too high. But I was proved wrong and its stock price keeps rising. However, I am doubtful if Google will be able to get significant benefit out of YouTube. Ebay also paid billion-plus dollars for Skype and from what I have heard, it seems to be having problems getting pay off from it's purchase of Skype. I believe it's very hard for any firm to extract significant benefits from purchases of firms such as Skype, YouTube which in the past attracted a large user base because of free phone calls, content etc. On top of it, the purchase cost of $1b+ is huge.

Any ways, am sure people at Google are smart; let's see how this purchase pans out in the long run. Judging by its past history and recent performance, chances are Google will prove skeptics like myself wrong. It's Q3, 2006 earnings again beat the analyst's expectations and the stock price was up almost $34 (7.89%) to close at $459.67 on October 20, 2006. Famous finance radio show host, Jim Cramer also seems to be upbeat on it. What's surprising is that while Yahoo's stock has been taking a beating lately and the company blames poor ad sales for its recent woes, Google has been doing well even though it operates primarily in the same space as Yahoo. Lets see whether the Google stock will prove to be a bubble or a baby that has still long ways to grow.

As always, a final disclaimer: the purpose of my writings or this web site is not to give any financial advice nor make any recommendations. This site is just a blog of my activities, interests and thoughts. Trading options and stocks can be very risky, so you need to exercise your judgment and seek competent advice before investing in such instruments.

posted by Ruby @ 1:31 PM

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