Archive for July, 2007

For the last few weeks, all the headlines and press mentions about GOOG have centered on their supposed earnings miss.  All negative stuff.
On the day after GOOG reported, though, I blogged that I believed GOOG actually beat earnings.  I have good data to support this.  There’s also precedent since the exact same thing happened in Feb 2006.
Since that blog entry, I must have pinged a dozen journalist and analyst.
I’m getting nothing but blank stares.
Which is driving me crazy… how can this kind of mistake happen to the most important of tech bell weathers? 
It’s unfathomable.
After an email conversation today with a wickedly smart ex-journalist, I realize that I’m probably asking the wrong question.  The right question is, "why would people not want to admit the mistake?
For journalist, it’s all about a sensational headline.  The "They’ve Missed!" headlines were certainly sensational and embarrassing to backtrack on.
For analysts, well, they’re the smart money.  It’s called, "inefficiency in the market"… a buying opportunity going into next Q’s results…  GOOG at 498.88 (low in last few weeks) is cheaper than GOOG in the 600’s… where GOOG probably would have been if the headlines read, "GOOG Blows Out Earnings" again.  I don’t think it’s a coincidence that GOOG weathered last week’s market carnage like a champ.
I guess life is about asking the right questions.
Adam Lashinsky had an interesting piece yesterday, "Pondering Google’s Greatness."
It’s something that has been on my mind.
The interesting quote:
     Google so far has been able to avoid answering the question of whether its chaotic nature is by design or whether it’s merely holding onto the handles of one incredibly fast roller-coaster ride.
He never really answers that question… but I think my response to him does (and, yes, it’s by design):
I enjoy your stuff. 
Google is great — by design — because they don’t worry about efficiency… they worry about effectiveness.
In big business, effectiveness means progress… efficiency means bureaucracy.
I’ve done business dev with all the major online players.  Doing something with Google is a couple week effort. 
With anyone else, months, if not quarters.
That’s why it seems like Google is sprinting… and everyone else is running in place:  Google actually gets stuff done.
And, Google is faster to figure out what works and what doesn’t.
I used to think Google’s "Chaos Theory of Management" meant that GOOG would eventually collapse onto itself.
Now I realize that Google is a model for modern businesses working at the speed of the Internet:  Everyone else adapts or gets left in the dust.
–Royal Farros.
Is anyone noticing that Microsoft is slowly knocking in some wins?  Digg yesterdayMassive in Madden games todayFacebook a while back.
As mentioned before, Microsoft is at its best when it’s an underdog. 
(Helps to have a pile of cash, too!)
Everyone is saying Jerry Yang, the new CEO and co-founder of Yahoo!, has to do something bold. 
That’s not YHOO’s problem.
Hard to believe given the press, but YHOO does have a good business:  Good financials that reflect a lot of loyal, paying customers.
YHOO’s problem is that it’s compared to the greatest company of all time. 
Why is GOOG the greatest company of all time? 
For a lot of reasons.  But here’s an important one:  Like all great companies, while GOOG has a lot of irons in the fire, it makes damn well sure it executes on the important thing.
YHOO, in contrast, has seemed to focus on everything but the important thing.
That’s what Jerry needs to do… that Semel was incapable of doing because he wasn’t a tech guy… get YHOO to execute on the Panama stuff… as well as making damn sure Panama Version 2.0 ships on time… as well as making damn sure Panama Version 3.0 is absolutely killer.
Essentially, good ole fashioned product management stuff.
Just ship, baby.  And make it great!
P.S.  Thanks, Tom, for inspiring this post. <smile>

To SOX Or Not To SOX

Posted: July 24, 2007 in Uncategorized
One of my favorite tech writers forever, John Dvorak, wrote a good piece about Sarbanes-Oxley (SOX), the new accounting approach/rules that kicked in to protect the world against future Enron’s and MCI messes.
Here are a few of my favorite quotes:
     I tell people that Sarbanes-Oxley should be called by its real name, "The public accountant and auditor’s protection act of 2002."
     This has nothing to do with protecting the investors or the public in general. It’s to protect the bookkeeping class from getting in trouble for crummy work.
     So meanwhile we now treat all CEO’s of public companies as pre-criminals who now have to report to the parole board every quarter.
     So what small start-up wants to tolerate this sort of abuse and become an American Corporation?  Thus they jump onto the London stock exchange or become Canadian corporations, maybe even Swiss corporations.
John, as always, takes the controversial point-of-view, since most people believe that SOX swept in and saved the day.
With a little time under our belts, though, we’re seeing a different picture emerge… that of compliance gone haywire. 
Headlines say that GOOG missed… supposed to be $3.59 but instead came in at $3.56.
But — just like the last time GOOG missed by announcing a charitable fund without telling analyst to remove that one-time allocation from operating estimate — they did it again: 
Apparently, GOOG is changing the way the are accounting for bonuses and as a result taking a one-time accounting hit for $60m — or 19 cents — to earnings.
19 cents?  That means GOOG didn’t miss by 3 cents but beat by 16 cent.
Can somebody — anybody — please help these massive titans of industry manage the simplest of accounting communications… ?

YHOO’s Only Surprise

Posted: July 18, 2007 in Uncategorized
YHOO reported as expected.  No surprise.
All the headlines have been negative.  No surprise.
However, Henry Blodget of the Internet Outsider took an interesting tact, listing all the silverlining items from the conference call.
My favorite quote from this piece:
     "We did not have to hear Terry tell us that Yahoo had a great quarter, is outgrowing the market, and is in fantastic shape–and wonder whether he had ever set foot in the place."
So true!
But speaking of Semel, interesting that G&A related Stock Based Compensation Expense plummeted from $23.5m to $9.9m this quarter.
Assuming that’s Semel hangover shares, that $9.9m divided by shares rounds up to 1 cent.
So — I wonder once again — did Semel’s irresponsible comp package cause YHOO to miss beating by a penny?
If so, you just gotta wonder who on the board got YHOO into that mess… ?!
Going to Iceland this week for, of all things, a bachelor party.
No one ever thought this guy would get married.
Yes, Hell has frozen over. <smile>
A good Web 2.0 company name is one that makes normal people (i.e., non-techs) say, "huh?"
Why?  Because — it’s true — the world has run out of normal names and URLs.
Ugh.  (Which, coincidentally is also already taken.)

GOOG $700

Posted: July 5, 2007 in Technology and Business
Am I the first to set a 24-month GOOG price target at $700?
Here’s my logic:
Quarter-to-quarter growth of 7.5% during 2007, 6.25% in 2008, and 5% in 2009.
A lot of the same assumptions I made with my first target here and here.
     Q1 ’07     $3.7b
     Q2 ’07     $3.9b
     Q3 ’07     $4.2b
     Q4 ’07     $4.6b
     Q1 ’08     $4.8b
     Q2 ’08     $5.1b
     Q3 ’08     $5.5b
     Q4 ’08     $5.8b
     Q1 ’09     $6.1b
     Q2 ’09     $6.4b
So, $6.4b x 4 quarters x 8 multiple + a bit extra since GOOG continues to surprise everyone = a 24-month price target of $700.

GOOG Price Target Nailed

Posted: July 5, 2007 in Uncategorized
In February 2006, I threw out my first ever 24-month price target on GOOG… $541.30.
Got a lot of "that’s outrageous" remarks back then… GOOG was trading at $396.04… and then at $358.77 when I reiterated the target a week later.
GOOG closed today at $541.63, 17 months later.
I’m not going to quit my day job, but it’s still kinda cool to hit a public price prediction.