When news starts to sound like noise it’s usually an indicator that hype is clouding the reality of events. It’s difficult not to see the auspiciously named News.com’s appraisal of Google in yesterday’s article “What you get for $400 a share” as exactly this, and it should serve as a warning for those who are invested anywhere near the current price.
It’s easy to forget about the industry potential of any company but Google and overlook other newsworthy items with all the current hype surrounding the search-engine goliath, but some alternative analysis might well pay off.
Take TiVO, the low-key U.S. manufacturer of live television streaming boxes and yesterday’s announcement on the rather more credible news provider Reuters that it was “working on technology that lets viewers search for specific advertisements … (that) would begin testing a feature to let some subscribers transfer recorded television programing to Apple Computer Inc.'s iPod digital music players”. Uneventful as this might sound aside such mesmerising commentary by News. Com that “Google will no doubt figure out a way to charge for (free services) so it's not so dependent on advertising … (being) the "it" tech company of the moment”, the former is at least a statement of actual strategic intent.
A partnership with Apple computers is a smart way to leverage the brand equity of a company one-twenty-fifth of Google’s size with the capability of a company three-quarters of the size and with a price to earnings ratio in the market of half the Mountain View empire’s at a time when the latter now looks overpriced by any reasonable financial calculation (see In Search of the Future: Google Vs. Microsoft).
What the above signals is first-mover advantage in the as yet undominated computer-television market, a lucrative source of advertising revenue for those who manage to get in on the act. And TiVO, by all accounts, has plenty of experience: this was a company, after all, which entered the market in the bull-market hype of the millenium and who, despite having yet to make a profit, has weathered all the possible storms a company could in a bear market. Google, as I have stated here before, is a rookie to the NASDAQ, and its showing.
Investors should be well aware by now that past performance of an equity’s share price is certainly no indicator to future performance of the stock, and neither is it to the actual state of the company. Amidst the clamourous gong of all the noise, it's all too easy to overlook the news that makes tomorrow's headlines.
Jobs never ceases to amaze:
From Time Magazine, Oct 25, 2005
"Right now, nobody disputes that digital music is the future and that Apple is the gatekeeper. If it becomes the gatekeeper to portable video, well, then, golly. Video is the blood and the lymph and the lingua franca of contemporary culture. Music is important, of course, but the scale is different. In a typical week, a top-selling album may move 300,000 copies. A top-rated TV show can draw an audience of 30 million. Add to that movie trailers, animated shorts, old syndicated shows, DVD-extra-style exclusives, and the entire television industry, which is hungry for new kinds of revenue, is going to have to reorient itself. And maybe a few other industries besides (cough! porn! cough!).
The new iPod's potential is so huge, it inspires even Jobs to a burst of understatement. "There is no market today for portable video," he says. "We're going to sell millions of these to people who want to play their music, and video is going to come along for the ride. Anyone who wants to put out video content will put it out for this. And we'll find out what happens."
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As someone who hasn't watched TV for decades, this is all alien to me, but Jobs has obviously scored again.
http://time-proxy.yaga.com/time/archive/preview/0,10987,1118384,00.html
Posted by: Doug | November 30, 2005 at 06:33 PM