Google stock holders will be celebrating thanks to the technology giants latest milestone when its share prices reached US$800 on Tuesday, February 19 for the first time in the company’s history. The thresh hold was breached after investors were confident the company could keep posting increasing profits from its dominant search engine and mobile platform. It has taken the company’s stock five years to climb up from the US$700 mark in October 2007. The high was followed by a global economic crisis which caused Google shares to tumble and become stagnant. Eventually a change in leadership was needed and the resurgent stock has shown the marketplaces approval of co-founder Larry Page at the helm of the company. Eric Schmidt was removed from the CEO post in April 2011 and Page took over and has helped the firm gain 35%. In the same time frame, the Standard & Poor’s 500 index has only grown 15%.
Many would think that Google wants to reach the milestone but this may not be all true. The technology giant wanted to split its stock in 2012 which would have reduced the share price in half at the time. However the move hit a snag because of a shareholder lawsuit that claimed a stock split would give too much power to Google co-founders Sergey Brin and Larry page. Even if the stock split did take place chances are the company would have still been at the current valuation of US$265-billion.
According to many observers and analysts, Google should be a healthy company for the coming future because of its many business advantages. It currently holds the top spot in search engines which powers its money making advertising network. Other major products include YouTube which has been gaining advertising revenue along with the company’s mobile operating system, Android, which currently runs on 600 million smartphones and tablet world wide.
Some concerned that do exist relate to the company’s ability to convert its dominant position in mobile to generate revenue. There are also voices that want to know if Google can reverse the trend of lower ad prices for its online search engine ads also. Many critics point at the lower priced ads for mobile as a concern which Google is trying to address by implementing new strategies to get more mobile revenue.
Even though Google got through the recession with out losing too much ground the company’s stock still hit a low of US$247.30 at the end of 2008. The situation was looking bad in 2009 and the company was forced to re-price stock option for its employees. With the world economy starting to come out of the recession in 2009, Google was still in a slow state of growth. The startup was now a major corporation with thousands of employees and offices around the world and the transition was becoming rough. Competitors like Facebook were also popping up as new ways to advertise online and they chipped away at Google importance.
However, Larry Page changed all that and shut down many money losing operations and helped the market regain confidence in the company. On the other hand Facebook had a botched IPO along with a straggling stock which has underperformed expectations.
Source: Financial Post
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