There has been a considerable debate over the years about whether Google (GOOG) is a technology company or a media company or consumer company or a new age company or a... As a result its future potential was analyzed and priced by some investment gurus one way and by others another, meaning they all used a separate set of assumptions against the same set of facts.
For the casual investor, to depend on such analyses is like depending on S&P to rate your mortgage-backed securities. When I last looked at this issue in February 2010, I wrote:
"Google begins its 10-K with the statement:
"Google is a global technology leader..."
"As such Google doesn't compare itself against Amazon or eBay, Disney or McGraw Hill. If you think of Google in that way instead of as an enteprise (sic) software market leader along with IBM, Microsoft (MSFT), Oracle (ORCL) and SAP, you do so at odds with the founders and other insiders that control 70% of the votes. If Eric, Larry and Sergey think they own a technology company, Google is a technology company.
So 18 months later, Google's pending (but likely to be adjudicated) acquisition of Motorola Mobility just puts the exclamation point on that way of looking at the company. (Except that Eric is gone and you can take SAP from the list.)
I concluded at the time:
"So instead, think of Google this way: Primarily Google indexes information and web sites on its extremely large worldwide server farms in order to facilitate free Internet searches that help Google “sell” marketing enterprise applications. Brilliantly these enterprise software sales are monetized by over $20 billion in advertising revenue annually instead of boring old license and maintenance contracts. But Google is still an enterprise software company."
Eighteen months later the pending Motorola Mobility acquisition just adds "from the palm of your hands to" to the phrase "worldwide server farms." And "over $20 billion" has become "over $25 billion." (And note that elsewhere -- thanks to Oracle -- I had changed the definition of "enterprise software company.")
When you invest in a company, take the owners' word for it -- not some investment guru's -- when they tell you what they do. It's their baby.
-- Dennis Byron