Thursday, August 18, 2011

Google's Motorola Bid

There has, of course, been much discussion of Google's surprise bid to buy Motorola's hand set company with its associated, valuable patent portfolio.

As is often the case, the Wall Street Journal's Holman Jenkins, Jr., in his weekly column yesterday, wrote what is perhaps the best overview of the situation. He characterizes Google's move as wanting to follow Apple into the territory of providing ubiquitous device access of content on a company's software platforms, from PC to cell phone to tablet.

It occurred to me that my equity portfolio selections have routinely included Apple for years, but not Google. Not ever, to my knowledge. Or, perhaps, only briefly.

Initially, the latter was too pricey. Now, it may be too sluggish, both from a revenue and total return standpoint. Consider the nearby price chart of Apple, Google and the S&P500 Index for the past five years.

Coming out of the 2008 financial and market crisis, the two companies' equity price paths began to diverge significantly by the end of 2009. The gap between Apple and Google is, to me, stunningly larger than that between Google and the index. Not surprising, mind you, but stunning, none the less.

Google has been celebrated for its record-breaking growth, and, certainly, the sources of its revenues was a departure from past technology startups. Prospering from selling participation in searches for what became the dominant online search engine was probably outside most strategists' box, as it were.

Now we see it apparently return to earth, actually buying a hardware manufacturer.
Will the senior management of Google be capable of not screwing up Motorola's business? Will they capably handle an actual physical product business? Will said business alter the market performance of Google?

All interesting and important questions.

But I wonder what the Motorola bid says about Google's business strategy, objectives, etc. Do the founders simply view the company as able to do whatever they wish? Do they have financial or strategic objectives?

The firm doesn't seem to have specific product/markets it chooses to enter first, so much as businesses it enters to prevent others, like Facebook or Apple, from expanding their own businesses in ways which could negatively affect Google's.

Thus, so much of what we see of Google's recent moves seem to be defensive. I suspect they just don't have any tangible, solid objectives, so much as a desire to protect their existing businesses from falling victim to other companies' strategies.

Perhaps they've watched the decline of Yahoo and Microsoft, and wish mostly little more than not to let the fates of those once high-fliers become that of Google, as well.

Which probably means, as wireless connectivity and ubiquity is driving so much content access to every platform, that Google's actions may become more frenzied and less integrated as uncoordinated technological advances push it into more frequent defensive moves.

No comments: