Alphabet Inc (GOOG)

[SeriousMoney]

Giant Google is in 'sweet spot'

Buoyed by reports of taking a stake in AOL, shares surge to $131.9B, surpassing IBM's market cap of $131B briefly.
Ron Day / Bloomberg News, December 20, 2005

Google Inc., the Internet search company founded seven years ago by two college friends, briefly surpassed International Business Machines Corp. in market value Monday on reports of a deal to take a stake in AOL.

Google surged to $131.9 billion when its shares rose 3.7 percent to $446.21 on the news, topping IBM's market cap of $131 billion. Google shares closed down 1.3 percent. At day's end, IBM was worth $130.7 billion and Google had fallen to $125.5 billion.

Google's shares have more than doubled since Jan. 1 on analysts' expectations that profit will rise four-fold to $1.62 billion this year. IBM shares have declined 15 percent on estimates of 11 percent profit growth and a 4 percent sales drop. A stake in AOL would help Google, the world's most-used search engine, fend off competition from Microsoft Corp.'s MSN search.

"There are some big shifts going on and Google is in the sweet spot," said Michael Halloran, an analyst with Allegiant Asset Management Co. in Pittsburgh, which owns Google shares among $12 billion under management. "Since their IPO they've done nothing but surprise on the upside. If you look at Google, it has totally different growth characteristics" than IBM, he said.

IBM, founded in 1911 with roots dating to 1880, according to its Web site, is also the world's second-biggest software company after Microsoft. It has 329,000 employees.

Google's market cap earlier this year passed that of Cisco Systems Inc., the biggest maker of equipment to direct Internet traffic. Google is attracting advertisers who are spending more to reach its 400 million monthly users.

Shares of Mountain View, California-based Google rose earlier on reports that Time Warner Inc.'s America Online chose to sell a stake in itself to Google instead of Microsoft Corp.

Google shares, after reaching a high for the year, fell $5.55 to close at $424.60 in Nasdaq Stock Market composite trading. Shares of Armonk, New York-based IBM fell 61 cents to $82.76 in New York Stock Exchange composite trading.

Google, which has 4,138 employees, was founded in 1998 by Stanford University students Larry Page and Sergey Brin.

Last week Google agreed to pay New York-based Time Warner $1 billion for a 5 percent stake in AOL, according to a person familiar with the matter.

The accord snatched AOL away from Microsoft, which had been in partnership talks for almost a year. Aside from winning a victory against Microsoft, Google will retain its largest search customer and will also gain access to AOL's content and video search features.

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