Forum Moderators: goodroi
Actually Overture is currently valued at 2 times sales. That would put google at a value of 2 billion if the revenues are 1 billion if you used the same yardstick
But for overture all the sales is not profit as the a major chunk of it goes to the partners like Yahoo and MSN .
But for Google pretty much all sales are profit (except for sales from partners like AOl and also adsense sales which by the by i dont think is big yet )
I do not use it often, but there are people who live on that site. It has gotten very popular in the 18-27 age group here in chicago.
I have also noticed an increasing dissatisfaction with the quality of the search results on Google amongst their normal users. Internet users are fickle people and if they find somewhere better, Google may well lose users in large numbers.
I would put a maximum of 3 times annual profits as a value for any Internet dependent company. Apart from my own of course...
The natural thing then happened, people bought stock at very high prices, In effect the company involved was not nearly able to deliver on it's opening price and the shares crashed.
Some may say that Google is a bubble in the making but i'm not so sure. Back in the 90's it was un-known teritory. Now (hopefuly) things will be very different.
The massive things that makes Google very different to the previous range of dot com busts is google are actualy consistintly making a profit each quarter. Google is also a brand. Google also has the ability to move forward.
In the mid 90's is was wanabee companies competing in saturated markets all keen to go IPO at the first possible oppertunity without any concederation or care of what the competition where doing.
Google are smart, I don't see them making the same mistakes. The fact that they have waited this long makes me thing they are binding their time waititing for the right moment.
As for $18 billion. I don't see this being un-realistic. Google is one of the webs largest brands. Although I am yet to read this figure as being official.
Mack.
Apart from making the current share holders very wealthy, are there any particular reasons for Google to go public? They make a tidy profit already, surely enough for any aquisitions that they are considering.
What would they really do with all of that cash? They are the search market, so there isn't much room to expand there.
- Cash for the owners (and maybe an exit for the VCs)
- a currency in shares for takeovers (who says they want only the search market?)
- a currency for employee share options
- tip a toe in the water with a small IPO just to get a market valuation of your company
- ability to go to the market for a rights issue (google couldn't nearly swallow its biggest competitors with the cash it earns)
- Maybe the owners think the company would be overvalued at IPO time by the market, and this is the right time to sell out? (18 billion! That's enough money to give the whole planet fresh drinking water)
I'm sure if you read some other threads here there are a thousand other reasons.
18 billion is insane
Quite agreee - since when do you apply a sale factor of 20 which is standard, to a company that could be a fickle option for users based on software that seeks for websites that increasingly employ savvy webmasters to make sure their sites appears in front of the relevant user.
I too heard $6 billion - this seems a fairer valuation of a global business.
TW
Though some products that Microsoft makes is not successful and I don't know why they launch it knowing the performence..., Products like Microsoft ME, MSN Search are just too useless products that MS has launched.
Sid
With Google, if their revenue is $1 billion per annum (which means their NET profit is lower than $1 billion), then assuming they're valued at $18 billion, it means return on investments/equity are 5.56% ( 1/18 * 100) - thus, net earnings AFTER expenses is less than 5.56%.
IMO, it would be better to invest in cash management call accounts where I stay now - and enjoy a return of 5.11% per annum with next to zero risk (and without having to worry about Yahoo dropping Google etc).
Of course, we also have to take into consideration of the growth rates and a lot of other factors. There may be flaws in my analysis.
