Replies to post #2139 on Alphabet Inc (GOOG)

[SeriousMoney]

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[SeriousMoney]

Is Google a Good Candidate for Rational Exuberance?
By ANDREW ROSS SORKIN
New York Times, January 8, 2006

IS the dot-com bubble reinflating?

Last week, a relatively obscure Wall Street analyst named Safa Rashtchy, from Piper Jaffray, became an overnight sensation among the Internet faithful. He predicted that Google's stock price, which has climbed more than 350 percent since its initial public offering in 2004, and was $422.52 at the time, would hit $600 a share by the end of 2006.

Mr. Rashtchy's bold forecast recalls memories of the time in 1998 that Henry Blodget, then a young, unknown analyst at CIBC Oppenheimer, predicted that Amazon.com would hit $400 a share. At the time, Amazon stock traded at $242.75 a share; after Mr. Blodget's prognostication, the stock jumped to more than $600.

Of course, the story did not end well for Mr. Blodget: Amazon's stock eventually fell back to earth (today, it is trading at around $288, after accounting for splits) and Mr. Blodget himself, who had been hired away by Merrill Lynch with a seven-figure salary after his seemingly prescient call, was barred from working in the securities industry when it emerged that he had touted other companies that were also clients of the firm.

No one is suggesting that Mr. Rashtchy is involved in any chicanery, but his prophecy does raise the question of whether analysts and investors have once again become irrationally gaga over the Internet, and Google in particular.

Reached on his cellphone at the Consumer Electronics Show in Las Vegas, Mr. Rashtchy acknowledged that his prediction might seem a bit 1999.

"It's understandable that comparisons are made to the bubble," he said. "But this wasn't supposed to be a heroic call or to make noise."

Still, it was and it did. Shares of Google shot up to $435.23 the day of the report, and had risen to $465.66 by Friday.

Mr. Rashtchy said he based his prediction on estimates that were "fairly reasonable" and "entirely supported by historical ranges."

So is he right?

For whatever it is worth, here's Mr. Blodget with an answer: "No, Safa's not nuts," he wrote on his blog (www.internetoutsider.com). "He simply assumes that Google's recent growth trends will continue in pretty much a straight line for the next two years and that the market will put the same multiple on the stock next January as it does now. And unlike most of the pantywaist Google analyst herd, he's bold enough to stick his neck out."

The pantywaists may already be feeling their oats, thanks to Mr. Rashtchy. Another analyst, Mark Stahlman, at Caris & Company, said Friday that Google shares could one day hit $2,000. (Other mainstream analysts, like Goldman Sachs, have raised their target share price to $500.)

That is not to say Mr. Rashtchy's forecast is risk-free. Part of his estimate assumes that Google's profit margin will continue to be above 50 percent. That may prove true, but the company is spending more than $800 million a year, and if it decides to spend even more that could squeeze its margin.

And remember, unlike many other companies that focus on reaching quarterly targets, Google warned early on, in its prospectus for its initial public offering, about the evils of Wall Street's focus on short-term profits and told investors that it would not concern itself with those numbers.

Mr. Rashtchy's prediction also assumes that Google's market share will keep growing, but he doesn't acknowledge that Microsoft and Yahoo are hot on its tail and could begin to eat into its business.

But perhaps Mr. Rashtchy's boldest assumption is that Google can maintain its share price at 50 times next year's earning per share. That is simply a function of market psychology, which is a notoriously unstable entity. If investors get nervous about the Internet sector, Google investors will lose their shirts.

As for Mr. Blodget, he predicts Mr. Rashtchy may be on the money. "In my opinion, there's about a 33 percent chance that Google's future will be as good or better than he predicts," he said.

Mr. Rashtchy, meanwhile, appears a little uneasy about his newfound fame

"It's a little embarrassing," he said. "People recognize me when they see my name. They say, 'So you're the guy who is going to take Google to $600.' "

http://www.nytimes.com/2006/01/08/weekinreview/08sorkin.html?adxnnl=1&adxnnlx=1136783494-8w3ZeLb...

[SeriousMoney]

Wanna see your favorite TV show? Google it.
by Phil Rosenthal, Chicago Tribune, January 12, 2006

It’s a blurring of the distinction between the TV screen and computer monitor, and yet another blow to free viewers from the tyranny of network schedules.

Google and CBS are partnering to peddle programs online in a landmark deal announced earlier this month.

The arrangement is the latest in a flurry of technology deals by traditional networks. They are wooing the consumers they’re losing over the air by making content available through new technology, such as Apple’s new video iPod and Comcast’s on-demand service.

The Google-CBS marriage is significant because it represents the first time a major Web site has teamed with a major broadcast network to make current hit programming available.

“Ultimately, we will be living in a world of the smart television ... where you can do anything from the television or the PC via one device,” said Robert Routh, a media analyst at Jefferies & Co. “This is the first step in the convergence that has been talked about for years by major media companies.

“I think it’s going to be much sooner than people expect,” Routh said. “All of these technologies, with the exception of digital television, have come dramatically faster than anyone anticipated. ... Cable modems were ubiquitous in a matter of no time.”

Friday’s announcement at the International Consumer Electronics Show in Las Vegas does more than bridge the 350 miles from Silicon Valley to Hollywood.

It is the latest development heralding a not-so-distant future in which appointment viewing, the notion of rearranging one’s schedule just to watch a particular TV show, could become an anachronism if not downright quaint.

It’s also a tacit acknowledgment that not all future TV viewing will be done on TVs, as programmers chase after viewers they appear to be losing to the Internet and elsewhere.

“Making our programming accessible to the Google Video Store guarantees our shows significant new exposure to millions of users who are likely to access this Web service and who may not be traditional TV viewers,” CBS Corp. president and CEO Leslie Moonves said in a statement.

The Google Video Store – at video.google.com – will offer episodes from CBS’ prime-time lineup and library, National Basketball Association games, Sony BMG music videos, news and archival material from ITN, interviews by Charlie Rose, cable programs and content from independent producers.

“For video producers and anyone with a video camera, Google Video will give you a platform to publish to the entire Google audience in a fast free and seamless way,” Google co-founder Larry Page said in a statement.

The involvement of CBS, which will sell commercial-free reruns at $1.99 a pop and share revenue with Google, is the latest entrepreneurial move promising to alter the relationship between TV viewers and TV networks.

The advent of digital video recorders that automatically snag programs their owners might like in addition to good old fashioned video cassette recorders already have empowered viewers to establish their own schedules and blow past the commercials that pay the freight.

One media executive questioned how many consumers would pony up $1.99 to watch a show they can see for free on broadcast television.

“I would love to see these guys try an ad-supported model as well,” said Tracey L. Scheppach, a vice president at media buying giant Starcom USA.

The Google deal follows a string of recent announcements from various media companies hoping to exploit new distribution platforms to reach viewers willing to pay to watch what they want, when they want it, where they want it and how they want it.

Disney, which owns ABC, and later NBC Universal cut deals with Apple to sell previously televised programs through its iTunes site for use on its video iPods and other portable devices.

CBS, through Comcast, arranged to sell its already broadcast programs on demand to digital cable subscribers in cities where the network owns stations, such as Chicago. And NBC has an agreement with DirecTV, enabling some satellite subscribers to download just-aired reruns to a video recorder for a fee or watch them on a pay-per-view basis.

Google rival Yahoo! announced Friday at the Consumer Electronics Show that it is offering a service that connects users to Yahoo! through their TV, computer and mobile phone.

Viacom’s Comedy Central cable service just this week became the latest to announce it will offer content for mobile phones. And Liberty Media’s Starz Entertainment Group, which has Encore and Starz pay-cable services, is introducing Vongo, a $9.99-per-month service allowing subscribers to download movies from the Internet for viewing on computers, hand-held video players and TV sets.

“It’s going to take a while for consumers who are used to a living room experience to adapt to watching television or entertainment programming - non-interactive content is what we call it - on a screen that they’re used to sitting two feet away from,” analyst Routh said.

“But ultimately,” he said, “with more and more of these flat screens that are computer-enabled being purchased by consumers, the convergence will happen and eventually there will be seamless integration between the two.”

Programs available on Google through the CBS deal include “CSI: Crime Scene Investigation,” “The Amazing Race” and “Survivor,” as well as vintage shows from the company library such as “The Twilight Zone,” “I Love Lucy” and “Star Trek: Deep Space Nine.”

Routh dismissed the idea CBS or other networks would be cannibalizing their viewership through alignment with an online site. “From a revenue perspective, an eyeball’s an eyeball,” he said.

“I wouldn’t be surprised to see more (deals) involving the other broadcast networks and the other Internet companies as they all realize that this is a potential long-term revenue generating opportunity that they don’t want to miss,” Routh said.

http://www.ecollegetimes.com/vnews/display.v/ART/2006/01/12/43c543a48188a