Making sense of Google’s seemingly kooky concepts
Google’s transparency about its unorthodox ways may be one reason the company hasn’t been stung yet by an outcry from its shareholders, although most analysts agree the stock price probably would be higher if management were to use some of the company’s $30 billion in cash to pay a quarterly dividend or buy back shares.
Google stock closed at $541.39 on Tuesday, down 13 percent for the year and far off its all-time high of nearly $750 three years ago.
The company’s uninterrupted streak of prosperity since its August 2004 IPO hasn’t hurt, either.
Google can afford to gamble more frequently than most companies because it dominates the Internet’s most lucrative market, the ads running alongside search results. And Google has seized on that opportunity in a manner that would make Gordon Gekko proud, beating back its competitors to boost its annual revenue from just $86 million in 2001 to nearly $30 billion now.
The company, based in Mountain View, Calif., began branching out beyond search well before it went public.
It set up an online news section that compiles the day’s top stories in 2002. Just a few months before its August 2004 IPO, Google unveiled a free e-mail service that boasted an unprecedented _ and still expanding _ amount of space per inbox.
In 2004, it bought an obscure digital mapping service called Keyhole that eventually turned Google into the place to go for directions. Even rival CEOs, such as Yahoo’s Carol Bartz, say it’s the best around.
More recently, Google created a free mobile operating system called Android that now powers millions of smart phones. This month, it’s rolling out technology with Sony that weds traditional television viewing with Web surfing.
Google’s expansion into mobile phones and television never seemed like quantum leaps for the company because they are little more than attempts to transplant its advertising model onto other Internet-connected screens that attract a lot of eyeballs.
The company also has poured money into building more widely available and faster ways for people to connect to the Internet, reasoning that it will make money if more Web surfers have the opportunity to use its ubiquitous services.
Schmidt, Google’s CEO, frequently tries to defuse the perception that the company is frivolous. He contends the company’s formula is disciplined: 70 percent of its resources go to the main search business, 20 percent to other projects connected to search, and 10 percent to initiatives that have nothing to do with search.
It’s difficult to argue with the formula so far, said Colin Gillis of the stock market research firm BGC Financial.
“As an analyst, I do hammer them on their (rising) expenses and some of their questionable investments,” he said. “But as a user of all their products, I love them. And from a purely personal perspective, I appreciate that Google is trying to use technology to solve the world’s problems.”