Lots to talk about today. You've probably already have read about Microsoft's $45 billion buyout of Yahoo. Obviously, Microsoft is giving up on its MSN web portal and throwing it's weight and capital behind Yahoo. For Yahoo, which has seen its stock slide precipitously in the last year, the deep pockets of Microsoft are a welcome balm or a company which took on Google in the mega-billion search engine wars and basically got its head handed to it.
The upside is huge. Google, the leader in the market for Internet search services and advertising, estimates that the market for Web search & advertising should reach $80 billion by 2010. Google has grown faster than Redmond, Washington-based Microsoft in every quarter since the 2004 IPO as its search engine won more users.
All I can offer right now on the Microsoft-Yahoo deal is that the early reports indicate that regulatory approval of the merger, both here and in Europe, should be a green light. It may take a few months to get the deal approved, but yes, a green light going in.
Another thought: why does Microsoft continue to pour money in other areas when the backlash against its new Vista operating system remains so high? Talk about taking your eye off the ball, but producing bug-free software has never been Bill Gates' strong point.
Interesting that the Microsoft-Yahoo deal is rolled out the same day that Google announced that it had failed to meet quarterly earnings expectations.
When its 4th quarter forecast was announced, Google stock plummeted. At about 2:30 EST the stock was off about $40 for the day, or 7.2 percent, to $523. Google stock had slid as low as $510, the biggest drop since its August 2004 initial public offering. The fallout saw Google slip from the 20- biggest U.S. companies by market capitalization, a very unnerving indicator for the tech sector, which is bracing for a bust on reports of a slowing economy and reduced business spending, especially on things that Google does so well with, like online ads.
``You've seen the peak in the pace of growth,'' analyst Clayton Moran of Stanford Group Corp. in Boca Raton, Florida, told Bloomberg. ``They're probably not going to be able to repeat the 60, 70, 80 percent growth rates that they had in the past.''
Google had hit a record high $741.79 on Nov. 6, 2007.
Wall Street was quick to act. According to Bloomberg, Analysts at Lehman Brothers Holdings Inc., Goldman Sachs Group Inc., Citigroup Inc. and Bear Stearns Cos. cut their price targets for the shares after yesterday's report. Jefferies & Co. dropped its rating to ``hold'' from ``buy.''
In a phone call to media and analysts, Google's co-founder Sergey Brin seemed preoccupied with the disappointing performance from the company's agreement with MySpace in 2006.
``I don't think we have the killer best way to advertise and monetize social networks yet,'' Google co-founder Sergey Brin said yesterday on a conference call with analysts. ``Some of the things we were working on in Q4 didn't pan out, and there were some disappointments there.''
Bloomberg also points out that the number of U.S. Internet queries dropped 3.9 percent in December, according to research firm ComScore Inc. Even so, Google remains non-plussed. ``There is no evidence to date of an economic slowdown,'' Google Chief Executive Officer Eric Schmidt said. ``If there were, we would be pretty well positioned.''
A hefty lead in market share will do that to a company. Google's share of the U.S. Internet search market rose to 56.3 percent in December from 50.8 percent at the end of 2006, while Yahoo's share fell, according to Nielsen Online.
I don't think Google is sweating over the Microsoft-Yahoo deal. Maybe on the economy and the slowdown in Internet search activity, but that's about it.
Keep an eye on Web user trends. When they rebound, so will Google.