Saturday, August 20, 2011

Google Plunges -13% for Week (Chart) *Announces acquisition of Motorola Mobility* GOOG


Google announced the acquisition of Motorola Mobility for $12.5 billion cash


Google Inc. GOOG closed at $490.92 on Friday, August 19, 2011 and was down -12.92% for the week, is down -18.68% for August, was up an impressive +19.22% for July, is now down -17.35% for 2011, and is up +68.76% since the March 9, 2009 market cyclical low. GOOG is down -23.25% 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. Google dropped below the 20-day average on August 4 and the 200-day average on August 8. GOOG has now dropped below the 50-day and 100-day averages on Tuesday, August 16.

S&P 500 By comparison, the overall market, the S&P 500, closed at 1123.53 for the week, and was down -4.69% for the week, is down -13.06% for August, was down -2.15% for July, and is down -10.66% for 2011. SPX is up +66.07% 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 -17.61% below that peak. GOOG is outperforming the overall market long-term since the March 9, 2009 market bottom, underperformed the market in 2010, and is now underperforming the market in 2011, though both are negative for the year. A review of the S&P 500 is here, S&P 500 Drops for Fourth Straight Week (Chart) *USA & global uncertainties weigh heavily*

Google Fundamentals Google reported strong calendar Q2 2011 financial results on July 14 and are reviewed here, Google Reports Strong Q2 Financial Results (Charts) *Record revenues, net income and EPS increase*. Current Google financial data, charts, and review is at the Google Financial Performance page, updated for the latest calendar Q2 2011 financial results, reported on July 14, 2011. A review and analysis of the Q2 2011 earnings call is at the Google Earnings Conference Call page. 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 53.97% of total revenues for Q2 2011, up from 53.29% QoQ and from 51.79% YoY.

Google News A summary of recent news & announcements are below in this post; others are posted on this blog.

Economic and Market News Information about the USA and world economies is posted at Boom Doom EconomyFinancial ControlsBaidu Planet, and Neo Solomon. 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 October 14, 2010 to illustrate price interactions and a long-term perspective.

Noteworthy Closing Prices
Current Close: $490.92
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 greater than descending 50d avg since 7-21-11, GOOG is well below both, tenuously bullish
Long Term Trend GOOG less than 10 month ema = 544.97, bearish
Key Resistance benchmark 500, major moving avgs are far above
Key Support 6-24-11 closing low 475
Moving Averages far below all major avgs: 20, 50, 100, 200
Uptrend Line below since 8-15-11; 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; tested 7-25 & 26-11; line from 11-6-07 closing high 741.79 down thru 1-18-11 closing high 639.63
RSI 14 Day = 23.76 is very oversold, descending
RSI 28 Day = 44.28 is reasonable, descending
MACD (12,26,9) = -11.55, descending, new multi-year low, multi-year high was 7-19-11 (+10.07)
Volume high 5.4M latest day, 50 day avg = 4.1M
Price Earnings Ratio (ttm) lower 17.71, approximate historical average of 21-22+


Conclusion Presumably Google plunged on an S&P downgrade of GOOG stock to sell, recent, lowered tech company outlooks, the announcement of the acquisition of Motorola Mobility, and the overall market downdraft. GOOG does have risk with the $12.5 billion cash acquisition of Motorola Mobility, pending regulatory approval, including a reverse termination fee of 20%. That is, Google will pay Motorola Mobility $2.5 billion if regulatory approval is not obtained and the acquisition is not consummated. Google has lost all the gains from the strong Q2 2011 earnings report. Analysts raised their estimates and/or price targets for GOOG as a result. Google Co-Founder and CEO Larry Page redeemed himself after his initial disappointing Q1 2011 financial results as CEO, which created uncertainty over the management restructure. CEO Page is now advancing aggressively with the acquisition of Motorola Mobility. The Q2 2011 financial results are reviewed on the on the Google Financial Performance page. The Q1 2011 earnings call is reviewed on the Google Earnings Conference Call page and will be updated soon for the Q2 2011 earnings call. We reiterate our forecast that Google should have better financial performance ahead in 2011. The intermediate-term trend is now tenuously bullish. The long-term trend is now bearishMore about the value of GOOG stock on the Google Stock Valuation page.

Disclosure We have no position in GOOG. We continue bullish on GOOG for 2011.

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 A summary of recent news & announcements; others are posted on this blog.
● Google announced the acquisition of Motorola Mobility on August 15, 2011.
● Google search had a 65.1% USA market share in July 2011, down from 65.5% in June 2011.
● Google Android had a 48% global market share in Q2 2011 of smartphone shipments per Canalys.
● Google in August 2011 added support for its Google Voice-based Gmail calling service in 38 languages all over the world. Users may also now buy calling credit in Canadian dollars, British pounds or Euros.
● Google TV sales via Logitech have been disastrous through June 2011, returns have exceeded sales. The price has been slashed from $249 to $99.
● The U.S. Senate Judiciary Committee's antitrust subcommittee has scheduled a September 21, 2011 hearing: "The Power of Google: Serving Consumers or Threatening Competitors?".
● Google CFO Patrick Pichette said at the Fortune Brainstorm Tech conference in July that Google Co-Founder and CEO Larry Page is "refocusing" Google back to its original "start-up philosophy" and specifically on products.
● Google CFO Patrick Pichette said at the Fortune Brainstorm Tech conference in July that 550,000 Android devices are being activated daily and the Google Chrome web browser has 160 million users. Previously, Andrew Rubin tweeted on June 28 that 500,000 Android devices were being activated daily at a growth rate of +4.4% weekly. At the Google Chrome Event in December 2010, Google said the Chrome web browser had 120+ million users.
● 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.
● Google unveiled Chromebook in May and both the Acer and Samsung versions went on sale in June.
● 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.
● 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.


Google Data Google's market capitalization dropped to 11th largest in the USA at $158.51 billion. This is behind #1 Exxon $339.38 billion, #2 Apple $330.07 billion, #3 Microsoft $201.50 billion, and #4 International Business Machines $188.15 billion (IBM initially passed $200B the week ended April 1, 2011). Google is the 4th largest technology company in the USA by market capitalization behind Apple, Microsoft, and IBM. Current Google financial data is at the Google Financial Performance page. A review and analysis of the Q2 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 28,768 full-time employees as of June 30, 2011, up from 26,316 full-time employees as of March 31, 2011. Google is compared to other giant technology companies here [Largest USA Tech Companies: Financial Performance & Position Review].

GOOG! 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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