Saturday, June 25, 2011

Google at 2011 Low on FTC Antitrust Investigation News (Chart) *Lowest close since September 8, 2010*


Google Search is the probable target of the Federal Trade Commission Inquiry


Google Inc. GOOG closed at $474.88 on Friday, June 24, 2011. Google was down -2.09% for the week, is down -10.23% for June, is down an incredible -20.05% for 2011, and is up +63.25% since the March 9, 2009 market cyclical low. GOOG is down -25.76% from the 2011 and multi-year closing high of $639.63 on January 18, 2011. That was the highest close since $653.82 on January 14, 2008.

S&P 500 By comparison, the overall market, the S&P 500, at 1268.45, was down -0.24% for the week, is down -5.71% for June, and is up +0.86% for 2011. SPX is up +87.49% since the March 9, 2009 market cyclical low. SPX closed at a multi-year closing high of 1363.61 on Friday, April 29, 2011, the highest close since the June 9, 2008 close of 1404.05, and is now -6.98% below that peak. A review of the S&P 500 is here [S&P 500 Drops 7 of Past 8 Weeks (Chart) *European debt crisis weighs on markets*]. GOOG is underperforming the overall market long-term since the March 9, 2009 market bottom, underperformed the market in 2010, and now has significantly underperformed the market in 2011.

Google Fundamentals Google reported disappointing calendar Q1 2011 financial results on ThursdayApril 14. Google financial data, charts, and review is at the Google Financial Performance page, updated for the latest calendar Q1 2011 financial results. A review and analysis of the Q1 2011 earnings call is at the Google Earnings Conference Call page. Jonathan Rosenberg, Senior Vice President of Product Management, announced on April 4 he would be leaving Google "in the coming months". Our updated valuation and target price for GOOG stock is posted at the Google Stock Valuation page. Revenues from outside of the United States were 53% of total revenues in the Q1 2011, up from 52% in Q4 2010.

Google News A summary and review of 2011 major announcements are below in this post.

Economic and Market News Information about the USA and world economies is posted at Boom Doom EconomyFinancial Controls, and Baidu Planet. Additional current commentary on both the overall stock market and economy is posted at Matrix Markets.


Google Daily Chart Below is the GOOG daily chart since May 7, 2010 to illustrate recent price interactions.

Noteworthy Closing Prices
Current Close: $474.88
2011 and Multi-Year High: January 18 $639.63
2011 Low: June 24 $474.88
2010 High: November 8 $626.77
2010 Low: July 6 $436.07
YE December 31, 2010: $593.97
YE December 31, 2009: $619.98
Cyclical Low November 24, 2008: $257.44

Google Chart Review
Intermediate Term Trend plunging 25d avg less than plunging 50d avg, GOOG well below both 25d and 50d avgs, very bearish
Long Term Trend GOOG much less than 10 month ema = 540.87, very bearish
Key Resistance , benchmark 500, 20d avg 507, 50d avg 522, 100d avg 558, 200d avg 570
Key Support at nominal support, 472, ultimately 437
Moving Averages below all averages monitored: 20d, 50d, 100d, 200d avgs
Uptrend Line below since 5-13-11; line from 11-24-08 cyclical closing low 257.44 up thru 7-6-10 closing low 436.07
Downtrend Line below since 1-18-11; line from 11-6-07 closing high 741.79 down thru 1-18-11 closing high 639.63
RSI 14 Day = 17.29 is very oversold, descending
RSI 28 Day = 32.50 is oversold, ascending
MACD (12,26,9) = -2.52, descending
Volume high 3.8M latest day, 50 day avg = 2.8M
Price Earnings Ratio (ttm) low 18.44, below historical average of 21-22+


Conclusion The FTC investigation announcement by Google on Friday, June 24 almost seems like a nail in the coffin. As noted in previous posts, unless there is some extraordinarily positive news, GOOG will probably languish until Q2 earnings in July. A third Death Cross, the now descending 100-day average crossing below the leveling off 200-day average, occurred on Monday, June 13, 2011.  A second Death Cross was the now plunging 50-day average descending below the 200-day average occurred on Wednesday, May 11. The first Death Cross was the 50-day average dropping below the 100-day average on April 5, 2011. GOOG plunged on April 15 after the Q1 financial results disappointed and are reviewed on the Google Financial Performance page. Higher operating expenses offset higher total revenues and there is uncertainty over the management restructure that placed Google Co-Founder Larry Page as CEO again. In addition, there is now concern that Q2 2011 ad revenues may be weaker than projected. The Q1 2011 earnings call is reviewed on the Google Earnings Conference Call page. We still forecast that Google should have better financial performance ahead in 2011. The intermediate-term trend continues very bearish. The long-term trend became very bearish the week ending April 15. More about Google the value of GOOG stock on the Google Stock Valuation page. Google is down, but not out.

Disclosure We have no position in GOOG. We continue bullish on GOOG for 2011. All is not lost, but nothing is likely to occur to rally GOOG until Q2 2011 financial results are reported in July.

Google I/O Conference was held May 10 and 11, 2011. Among the highlights were the rolling out of Google Music beta, integrating Android with Google TV, Google Movies for Android, unveiling Acer and Samsung Chromebooks, Android 3.1 upgrade (Honeycomb), Android 4.0 (Ice Cream Sandwich) coming soon, and Google @Home announced to connect household devices.

Google News
● Google announced June 24 the Federal Trade Commission had launched a "review of our business". This is believed to be an antitrust investigation into Google search. The European Commission began an investigation of Google for "abusing its dominance" in 2010 that is still in process.
Google Voice Search was announced June 14.
● comScore announced May 6 that Google Android was the top USA smartphone platform with a 34.7% market share for the quarter ending March 2011.
● Executive Chairman Eric Schmidt announced in February that 350,000 Android devices are being activated daily worldwide. This was confirmed at the Q1 2011 earnings conference call on April 14.
● Google announced One Pass on February 16 to counter the Apple announcement the previous day of an App Store subscription service. It does appear that Google is offering more favorable terms to publishers than Apple.
● Google was in the news in December as a result of the Google Chrome Event on December 7. In addition, Google announced the launch of the Samsung Nexus S Android (Gingerbread OS) smartphone and the opening of the eBooks Store. At the Google Chrome Event, the Chrome Web Store was launched, the Chrome Notebook was unveiled, which is planned to be consumer-ready by mid-2011 with Acer and Samsung as the first manufacturers, and Google announced the Chrome browser user base had increased +300% in 2010 with a conservative count of 120+ million active users. More innovation is coming for the Chrome browser, based on speed via Chrome Instant.
● Andrew Rubin tweeted on December 9 that 300,000 Android phones are being activated daily, which is a blowout number. This number - 300,000 Android activations - was reiterated by Jonathan Rosenberg, Senior Vice President of Product Management, during the Q4 2010 earnings call on January 20, 2011. This was after the negative news that the EU had launched an anti-trust investigation.


Google's market capitalization has dropped to the 15th largest in the USA at $153.03 billion. This is behind #1 Exxon $378.22 billion, #2 Apple $301.79 billion, #3 Microsoft $204.92 billion, and #4 International Business Machines $199.93 billion (IBM initially passed $200B the week ended April 1, 2011), and #13 Oracle $157.58 billion. Google is the 5th largest technology company in the USA by market capitalization behind Apple, Microsoft, IBM, and Oracle. Current Google financial data is at the Google Financial Performance page. A review and analysis of the Q1 2011 earnings call is at the Google Earnings Conference Call page. More about the value of GOOG stock on the Google Stock Valuation page. Headcount: On a worldwide basis, Google employed 26,316 full-time employees as of March 31, 2011, up from 24,400 full-time employees as of December 31, 2010.

Google describes itself in press releases as, "Google's innovative search technologies connect millions of people around the world with information every day. Founded in 1998 by Stanford Ph.D. students Larry Page and Sergey Brin, Google today is a top web property in all major global markets. Google's targeted advertising program provides businesses of all sizes with measurable results, while enhancing the overall web experience for users. Google is headquartered in Silicon Valley with offices throughout the Americas, Europe and Asia."

Google's Mission Statement: "Google's mission is to organize the world's information and make it universally accessible and useful. The first step toward fulfilling that mission came when our founders, Larry Page and Sergey Brin, working out of a Stanford University dorm room, developed a new approach to online search that quickly spread to information seekers around the globe. Google is now widely recognized as the world's largest search engine -- a free service whose utility and ease of use have made it one of the world's best-known brands almost entirely through word of mouth from satisfied users."


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