Posts tagged ‘internet’

Google Caught Naked: Their Loss, Your Gain?

Google Inc. (GOOG) got caught naked yesterday with the early release of its lackluster numbers and “Pending Larry Quote,” but is Google’s loss your gain? An endless number of bloggers and media outlets were quick to jump on the bandwagon, highlighting the sophomor-ish early dissemination of quarterly results, and then simultaneously headlines were blasted about a -20% drop in profits.

I love these sensationalist headlines that I hear chirped in the local Starbucks (SBUX), on the elevator, or at the grocery store. The Armageddon headlines and cascading minute-by-minute charts make for entertaining viewing, but the gaudy $40 billion in cash piling up on Google’s balance sheet, including the measly $3 billion it added in the quarter, may also be news-worthy. Fear sells more than greed, which may explain why there is little mention of Google’s +45% revenue growth (equally misleading because of the Motorola deal). Let me remind you, the $3 billion of cold hard cash created in a single 90 day period is the equivalent size of many large established companies – companies like Groupon Inc. (GRPN), Tesla Motors Inc. (TSLA), and Weight Watchers International Inc. (WTW).

If people could take off their panic caps for a minute, they would be able to see the explosion in smart phones (now around 1 billion)  is on pace to swell to 5 billion over the next decade. What will that mean for a market leader like Google with over ½ billion Android devices that is activating 1.3 million more every day? I don’t know for sure, but I’m willing to venture it is going to mean a lot of dough for Google. What further inspires my confidence? Well, the fact that Google’s mobile related revenues have gone from $2.5 billion run rate last year to over $8 billion today indicates they are on the right track.

Google got caught naked with its press release flub, and the frail Motorola acquisition may cause a little indigestion in the coming quarters, but any short-run Google losses may be your opportunity for long-term gains.

Wade W. Slome, CFA, CFP®

Plan. Invest. Prosper.

www.Sidoxia.com

DISCLOSURE: Sidoxia Capital Management (SCM) and some of its clients hold positions in certain exchange traded funds (ETFs) and GOOG, but at the time of publishing SCM had no direct positions in SBUX, TSLA, GRPN, WTW,  or any other security referenced in this article. No information accessed through the Investing Caffeine (IC) website constitutes investment, financial, legal, tax or other advice nor is to be relied on in making an investment or other decision. Please read disclosure language on IC Contact page.

October 19, 2012 at 10:49 am Leave a comment

The Internet: The Fourth Necessity

The basic necessities for human life are food, water, shelter and most importantly…the internet. Imagine a world where you cannot: access your email; text your spouse or significant other in the same house; Twitter the contents of your lunch; or Facebook a YouTube video of a dancing meringue dog (see video).  Scary thought.

Many people take the internet for granted, just like the air we breathe, but how important a role does the internet play in people’s lives? Mary Meeker, internet analyst from Morgan Stanley, takes a look at this question in a recently released presentation she completed. Earlier in the decade, Meeker was raked over the coals during the deflation of the internet bubble, but in many respects she has been redeemed in the subsequent years as hundreds of millions of people continue to plug into the internet.

According to the broad base of expert strategists, we apparently are living in an overvalued, “New Normal ” market with subdued growth for as far as the eye can see (check out New Abnormal). In the mean time Meeker shows how the top 15 global internet franchises have nearly quadrupled revenue from $33 billion in 2004 to $126 billion today. Perhaps abnormally outsized opportunities in the corporate internet universe will be the “New Normal” over the coming years?

Internet Ubiquity

Source: Morgan Stanley

How ubiquitous is the internet becoming? Last year 1.8 billion people accessed this invisible global flattening medium we like to call the internet, and users spent 18.8 trillion minutes online, up +21% over the previous year. Many people are very familiar with the home-bred internet franchises of Facebook (620 million users), Google (940 million users), and Apple (120 million internet device users), but many investors under-appreciate the global scale of international internet franchises like Tencent (637 million users…more than Facebook by the way), Baidu ($40 billion market value), or Alibaba.com ($10 billion market value).

Source: Morgan Stanley

Mobile ubiquity is on the rise too. Connecting through a desktop or laptop is not enough these days, so internet addicts are increasingly attaching a mobile phone umbilical cord for such useful bathroom applications such as this (click here). Lugging a laptop around all over the place can be an inconvenience. So primal is the mobile instinct among internet users, Morgan Stanley expects mobile phone shipments to surpass PC and laptop shipments over the next 24 months.

What’s Next?

The party is just getting started. If you just consider eCommerce (purchases online), which only accounts for 4% of total commerce conducted in the U.S., then there is a lot of headroom for internet purchases to expand. The incredible potential rings true especially if you contemplate old traditional catalog, which peaked at more than 10% of overall commerce according to some industry executives. The rich feature functionality afforded to users through the internet, coupled with the increased convenience of mobility, augur well for future ecommerce sales growth.

The internet has been around for 15 years, but in the whole scheme of things this transformative medium is just a baby – especially if you consider the amount of time it took other revolutions like electricity, the rail network, and automobile proliferation to spread.  That is why it is not too late to join the internet party.  Food, water, and shelter are human necessities of life, just like exposure to the internet revolution is a necessity for your investment portfolio.

Read the Morgan Stanley Internet Presentation by Mary Meeker

Wade W. Slome, CFA, CFP® 

Plan. Invest. Prosper. 

http://www.Sidoxia.com

DISCLOSURE: Sidoxia Capital Management (SCM) and some of its clients own certain exchange traded funds, AAPL and GOOG, but at the time of publishing SCM had no direct position in MS, BIDU, Tencent, Alibaba.com, Facebook, Twitter, or any other security referenced in this article. No information accessed through the Investing Caffeine (IC) website constitutes investment, financial, legal, tax or other advice nor is to be relied on in making an investment or other decision. Please read disclosure language on IC “Contact” page.

November 19, 2010 at 1:32 am Leave a comment

U.S. to China, “What’s Wrong With a Little Porn and Anarchy?”

The U.S. recently scheduled talks with the Chinese government to discuss the appropriateness of automated personal computer (PC) content filtering (including, pornography,  Falun Gong, and governmental protest content). Falun Gong is a meditatitve spiritual discipline frowned down upon by the Chinese government.

I can picture it now, U.S. officials calling up Chinese President Hu Jintao and saying, “Hey Hu, why not lighten up a bit on the freedom crackdowns  – what’s the big deal with a little pornography and anarchy?” The Chinese government feels that in the absence of structured laws, which would limit access to inappropriate content, the natives will become restless and ultimately disruptive. PC manufacturers would prefer not to reengineer PCs and increase the embedded costs to consumers by adding additional components. However, given the size of the Chinese PC market, the dominant foreign manufacturers are likely to cave to Chinese government demands, given the massive long-term potential of this Asian market. We have already seen Google (GOOG), Yahoo (YHOO), and Microsoft (MSFT) make concessions to the Chinese government in the algorithmic search arena.

Lord of the FliesThe thematic parallels presently occurring in China apply to William Golding’s Lord of the Flies (1954) as well. Lord of the Flies is a story about a group of stranded kids (surviving a plane crash) that battle for survival on a deserted island. Due to the lack of law, adult supervision and questionable tendencies, all hell eventually breaks loose. The Chinese government, managing a population of 1.3 billion people, fears a similarly hellacious outcome if an uncontrolled, lawless population consumes unfettered, unhealthy content. Given mistakes we’ve made abroad (e.g., Abu Ghraib, and Guantanomo), the Chinese and other countries are questioning the strength of our moral compass in judging or guiding other countries’ policies.

Although the U.S. government’s intentions are in the right place to protect the personal freedoms of people globally, we are not currently in the strongest moral position right now to cram our beliefs down other’s throats. Even the freest of societies such as our own limits certain actions – such as underage voting, underage drinking, and public nudity (O.K., I’m stretching a bit).

Regardless of your political views, one can appreciate the fear of anarchy in the hearts of the Chinese government. Practically speaking however, given the openness and rapid expansion of the global internet, the Chinese can only slow the expansion of individuals’ freedoms – recent events in the Middle East just provide additional evidence to this premise.

DISCLOSURE: At the time of publishing, in addition to owning certain exchange traded funds, Sidoxia Capital Management and some of its clients also owned GOOG, but  had no direct positions in YHOO, MSFT, or any other security referenced. No information accessed through the Investing Caffeine (IC) website constitutes investment, financial, legal, tax or other advice nor is to be relied on in making an investment or other decision. Please read disclosure language on IC “Contact” page.

June 23, 2009 at 5:30 am 1 comment


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