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Google-Eyed

(Updated)

Google is one of my favs and in my opinion, the most interesting company.

Unfortunately, the share price has been falling. There are several things happening that might push the share price further south. But if you know Google, you will believe that they will be having several aces up their sleeves.

The (-) factors: 1. Google is planning to raise $4.2B through a secondary listing. This can flood the market. 2. Google might buy some company like Baidu. Acquisitions usually drive down the stock price of the buyer. 3. Starting tomorrow, the people who bought GOOG in the IPO can sell under ‘long term capital gain’ tax rate coz 1yr has gone by. This could encourage a massive sell-off. 4. Microsoft is getting into a street-fight with Google.

The (+) factors: 1. Google OS. Even an announcement is enough to make the stock price sky rocket 2. The countless Ph.D.s can’t be sitting there doing nothing, right? :) We can soon expect a new product like Google Maps {Update : Google Sidebar} 3. I really think we will soon get Google Instant Messenger, which would be way better than all the messengers currently available.

Should we consider this fall in price as a buying opportunity?

3 comments
Anonymous wrote on Aug 22, 2005:
Hey!!!
I feel that acquisition driving the company down in terms of market valve is not TRUE.It has been a proven fact over a long time (if the integration is good), that really drives the market value over a period of time.Infact most big companies use acquisition as the tool to raise the revenue.Probably your discussion may hold good if there is a breakup and not an aquisition.

NOTE: The above comments are based on indian market and feel same applies for NASDAq as well...

ur comments plz..

rgds,
kasi
Kirubakaran wrote on Aug 22, 2005:
@kasi
The day the acquisition happens, the market value of the buyer falls and the market value of the company being acquired goes up. But as you say, in the long term, the overall market value will go up because higher earnings will be reported.

Right now I don't have a solid reasoning behind this short term price fall. But I'll find out.

Motley Fool on acquisitions
Investopedia on M&A
Wikipedia on M&A

Thanks Kasi!
Mallik Reddy wrote on Aug 22, 2005:
>One of the pesimistic reasons behind the sale is that the company is cash-ing in on the the high (inflated) price. May be true. May be the high price and subsiquent availability of funds accelerated their plans.
>With the $4B, they can easily take a shot at the OS. Anyway it is the company's money and nobody else's so, no emotions are involved in taking the decision. If the OS promises a decent revenue, they can go for it without second thought.
>Time to buy ?. May be so. Hoping that the $4.2B will be put to good use