Google Faces Wall Street Revolt 445
Fred Flange wrote to mention a Times of London article, which explains a minor rebellion against GOOG on Wall Street. The company, which has always refused to offer guidance for its stock, is now being peppered with requests to do just that. From the article: "Sergey Brin and Larry Page, Google's founders and biggest shareholders, made plain in their listing prospectus that the company would reject many of the orthodox methods of doing business with Wall Street and instead adopt a mantra to encourage its employees to do good and not 'evil'. Other Wall Street analysts last night were also preparing reports that agreed with RBC, The Times has learnt. 'The time has come for Google to step into line,' one analyst said. 'It is in the interest of all shareholders, including the company's employees and officers, that the share price achieves some stability.'"
Analysts say "Boo Hoo" (Score:5, Insightful)
Re:Analysts say "Boo Hoo" (Score:5, Interesting)
Their money was good enough for you to take and use; accountability to their requirements is only appropriate.
Yes, but I don't see the investors complaining. The only ones I see complaining are analysts. Do analysts represent the official corporate line of their investors? How many of these analysts actually hold Google stock?
Re:Analysts say "Boo Hoo" (Score:5, Interesting)
For their sake, hopefully none. The SEC is really cracking down on analysts who give positive ratings to stocks in which they have a direct interest, i.e. pumping up investment funds their own company sells. The pressure on Google to talk straight with analysts is probably in response to this policy. If the analyst can't make a good judgement and he has some kind of direct interest in that company, he could get into big trouble if he advises the wrong way.
That being said, I also think that Google doesn't have to play ball with these guys if they don't want to, but it might hurt them in the long run. Sure, it's nice public relations and all that, but pissing off the money people is not exactly something you do. Also, it seems like the analysts are whining more than anything. Google may think they're trying to change the way investors and companies interact and they kind of had the ball in their court for a while, but I think the recent fall in price probably are the investors indicating they want straight talk or else. It's russian roulette at $350 a bullet.
Re:Analysts say "Boo Hoo" (Score:3, Insightful)
Actually, it shouldn't hurt their stock price in the long run at all. Quarterly guidance is only useful for investors who trade in the very short term. They want to know what is going to happen during this quarter before the quarter ends and results are released. But in the end, no matter what guidance they gave, their earnings at the end of the quarter wil
Re:Analysts say "Boo Hoo" (Score:3, Insightful)
Be that as it may, that is precisely what the analysts are trying to affect. By telling the stockholders that this is having a negative impact on shareholder value, they are attempting to foment a coup - to bring Google in line with Wall Street's mantra, "maximize profit regardless of evil."
Re:Analysts say "Boo Hoo" (Score:3, Insightful)
The bottom line is they laid out the terms of how they did business and noone was obligated to buy. Likewise, Google is under no obligation to adapt their way of doing business because analysts don't like it. The majority shareholders set the terms, and they have the right to be risky, even stupid. They can ride the stock and the company right into the ground if they want to. The other possibility is they will turn out to be right. Ho
Re:Analysts say "Boo Hoo" (Score:4, Insightful)
Might end early? What would Legg Mason do with their shares? Sell them? That doesn't concern Google. They already have the money from the first sale. According to the information on their IPO, they've also been profitable since 2001 [cnn.com]. So they have no real need to raise capital at the moment, unless they're planning a massive expansion.
Also, Google's reticense supports my assertion that the IPO was a a stock run-up.
A lot of founders got rich on the IPO, just like every other company that smashed into the stock market in recent years. Is it really all that surprising that their stocks were received at a high price?
As for this being a pump and dump [wikipedia.org] scheme, there are a lot easier ways of doing this than setting up a multi-billion dollar company just to dump the stock. Hell, how do you think "financial analysts" make their money?
Step 1: "I believe that stock WXYZ is so great, that I've invested millions in it! You should too!"
Step 2: The analyst sells all his shares at the peak price, or on the downturn.
Step 3: "I used to believe in stock WXYZ, but now I believe that they have some rough times ahead. I'm selling all my stocks, and you should too!"
Step 4: Profit from the poor saps who lost money on your advice!
Step 5: Hype your abilities by getting testamonies from the few people who didn't lose money, rinse, and repeat.
Re:Analysts say "Boo Hoo" (Score:5, Informative)
Thus Google is in a perfect position to tell each and every shareholder in the market to, "buzz off." Even Fidelity and Legg Mason.
Hmm (Score:5, Insightful)
Re:Hmm (Score:5, Insightful)
Personally I'm convinced that they are just terrified of having to do their own research (maybe even do some analysis!) make their own predictions, and take the flak when they get it wrong.
They only want guidance so that their 'predictions' will be right, and if they aren't they can blame it on bad guidance.
Google should continue doing what it said it was going to do, regardless of what the analysts think of it. Screw them.
Z.
My Guidance if I were one of the Google founders: (Score:4, Insightful)
I think this obsession with quarters is hurting the businesses that the stock market is supposed to be helping. I've seen several instances where a stock posts very impressive per share profits, in down times even, fall a few cents short of average analyst estimates and boom, the share price drops.
Analysts, shareholders and other fools (Score:3, Insightful)
If we had reasonable analysts in a reasonable system giving reasonable LONG TERM analysis, the ol
Question: (Score:4, Interesting)
Re:Question: (Score:4, Insightful)
Google is in good company on this (Score:5, Insightful)
Re:Google is in good company on this (Score:3, Insightful)
Non-quarterly updates and only posting yearly results would in my opinion stabilize the stock. You wouldn't have major fluctuations 4 times per year and should the company get into trouble they still have the capital to attempt
Re:Question: (Score:3, Interesting)
Makes sense (Score:5, Interesting)
This introduces uncertainty, and the last thing that Wallstreet likes is uncertainty. Sometimes, companies have their stock prices going up even after they've lost a major deal simply because the period of uncertainty is over.
So, this makes a lot of sense - Google is causing uncertainty in the price, and that is definitely not good for GOOG's shareholders (or for Wallstreet, for that matter).
Re:Makes sense (Score:4, Insightful)
But "Wall Street" doesn't know much about anything, whether they have information or not. They forcast that a company should make a profit of 27 cents a share, the company only makes 26 cents, and the stock price plummets! Two companies are going to merge, making them stronger and better able to compete in the marketplace, and their stock prices drop on news of the merger!
Before you ascribe prognosticative powers to The Street, remember this is the same body that single-handedly created and destroyed the tech bubble because of their rabid need to invest in tech companies with no products, no marketing, and no major capital outlay. Wall Street doesn't have a clue what is really going on and the only people who seem to get rich in the stock market are a) people who are already rich and b) traders, brokers, and analysts and the comapnies they work for.
Re:Makes sense (Score:3, Interesting)
Uncertainty is also produced by analysts going on TV and speculating.
Worst of all are the short-sighted stock market gamblers who want ruinous long term tactics for short term profits.
Just imagine this: "Google isn't leveraging their home page with advertisments like Yahoo and MSN, so I'm downgrading
Actually, volatility decreases the values of stock (Score:5, Insightful)
If they manage an account and collect 1% as a fee, then the larger that account gets, they better they do. Now they could outperform the market to make extra money, but with only 1%, that's too much work. Market growth is the easiest way to grow.
Also, there are two ways to grow a companies's stock (assuming you believe that earnings matter in the long run), increase the underlying company's earnings (but that's work), or increase the P/E ratio (or FCF, or whatever ratio you like).
The assumption is that the price of the stock today is the NPV of all future cash flows (or dividends, which is theoretically the same but a harder model in the real world)...
So to increase the value of the stock, you can increase future cash flows (work), or decrease the discount factor...
Well, since most models of stock valuation demonstrate that Beta is a decent indicator of the "risk premium" (basically, discount factor = risk free rate (treasury bills) + Beta * (market premium)), so if we want to decrease the discount factor, we can decrease the rate of the treasury bill (out of our control), decrease the market premium, (out of our control), or decrease the Beta.
If Wall Street convinces Google to disclose more which reduces volitility (an interesting assumption, but let's pretend), then Beta goes down, discount factor goes down, and Google's stock price goes up...
With Magic, we've created value, our asset holding fees go up, we get a huge bonus, and most importantly, nobody had to do any ACTUALY work (like increase earnings) to get it done!
Alex
Google to Wall Street: (Score:5, Funny)
Well, good luck... (Score:3, Insightful)
Stay strong, Google! You may do things we don't like ocasionally, but you're still a wonderfull breath of fresh air in this rather stagnant world...
Maybe the analysts should do a little work??? (Score:5, Insightful)
A listed company doesn't have to provide guidance. However, they do have to make all information equally available to all investors.
What Wall Street dislikes is that Google is pointing out how moronic they really are.
Re:Maybe the analysts should do a little work??? (Score:5, Funny)
I wonder what those stock analysts would think of Stooooogle ?
The threat 'Go away or I will replace you with a very small shell script' comes to mind
Dear Larry and Sergei, (Score:5, Funny)
1) get bent
and
2) do their own work, the lazy bastards.
Love,
Justin.
It IS time (Score:3, Insightful)
How exactly is it an "evil" thing to be open and honest with your shareholders rather than asking them to trust in your "master plan?" That's like listening to the guy in the back alley who says "trust me, just close your eyes." Shareholders are going to become frustrated and begin to unload their shares as they realize that they own hugely inflated stock with no real idea of how the company intends to achieve that valuation on the books and not just in the eyes of stock market prospectors.
Re:It IS time (Score:5, Insightful)
And providing manipulative "guidance" in a desparate bid to stabilise stock prices by giving hints isn't one of them, which is why it is not mandatory. Presumably the shareholders had a duty to read the prospectus where it said the company would not issue guidance.
Until upper management learns this, their stock price is going to continue to decline sharply.
Come again? The stock price will change depending on each quarter's results combined with the investor's view on longer term prospects given the company's stated plan and management competence. Without guidance all that happens is that there is a greater divergence of opinion as to what next quarter's results will be.
How exactly is it an "evil" thing to be open and honest with your shareholders rather than asking them to trust in your "master plan?"
This has nothing to do with a master plan, this is all about analysts wanting to avoid looking foolish by using hints from Google on short-term results.
That's like listening to the guy in the back alley who says "trust me, just close your eyes."
Not really, unless the guy in the back alley also produces quarterly figures.
Shareholders are going to become frustrated and begin to unload their shares as they realize that they own hugely inflated stock with no real idea of how the company intends to achieve that valuation on the books and not just in the eyes of stock market prospectors.
I may agree, but guidance or the lack of guidance won't change that.
Re:It IS time (Score:3, Interesting)
This concept contains a hidden assumption that the company can maintain its current growth rate for at least 3 years. Since Google has announced publicly that the growth rate is going to fall (which sho
Pressure for short term profits (Score:5, Insightful)
Sometimes it is better not to let these folks get a foot in the door, because otherwise you get a bunch of people second guessing what your intentions are, and advocating positions that are great for them, but not for the long term prospects of the company.
Re:Pressure for short term profits (Score:4, Insightful)
Couldn't have said it better myself (so I won't). This is precisely why Google's business model has been working so well, in my opinion. Investors calling for Google to go the traditional route (and thus open the ugly, ugly door to input from impatient and fidgety Wall Street suits) are a threat to the long term success of the company. I'm convinced it's in Google's long-term interest to stay the path and let the stock price reflect investments that benefit the future of the company.
Let them eat cake (Score:3, Insightful)
Let them stare their greed in the face for a while.
Analysts are upset, should Google care? (Score:3, Insightful)
And who is this person to tell Google what to do? Just because they can not maximize their profit margins more easily, Google must change their ways?
Screw Guidance (Score:4, Insightful)
Google's doing the right thing telling "The Street" to fuck off.
Wall Street is still pissed off that they missed out on the initial public offering by Google going with a "Dutch Auction" where individual investors set the initial price, not a fixed price where insiders who get alloted shares can rake in freebie big payday.
Ya, I'm talking about you Goldman Sachs.
Bottom line is Google shouldn't cater to these "analysts". They all have axes to grind and pandering to them is a waste of time and money. Google should pursue success in many paths and if one of them takes years or decades to pan out, so be it.
Not that Google wasn't pulling a fast one the little guys who did invest in their company. The stock Google sold was "diluted voting rights stock". That's right, the original owners get special super duper voting power over you clowns with 100 shares.
Possibility for delisting? (Score:3, Informative)
I'm not saying I don't respect what Brin and Page are trying for, but they're going into a well-established arena and trying to do things in what seems to be a very unique way, an arena which is largely satisfied with the way things work. Perhaps we might see some minimum disclosure requirements added to the requirements for being listed on NASDAQ.
Frame it in the open source discussion, and some opinions might change. Isn't what analysts are calling for just like what the open source community calls for? We want to know how code works, to make sure it's doing the right things and not hiding wrong things. Isn't this what the Bush administration is criticized for, not giving guidance as to what they're doing? This is financial analysts wanting to get an idea of what's going on underneath the hood, rather than just guessing.
Again, I respect what they do, and if they push gently, they'll get something put in motion. But, if they push too hard for what they want before the market is ready for their philosophy, something might break.
Absolutely not (Score:4, Informative)
Contrary to what the analysts would have us believe, companies do have some rights in what and how they communicate to the public. (Because of Regulation FD, communication to investors and communication to the public are one and the same thing.)
Google (Score:5, Interesting)
Responsibility to the company vs. the stock (Score:5, Insightful)
I feel that this is incorrect -- Google and its board of directors have a responsibility to ensure that the company remains stable and grows at a reasonable rate. By and large, Google is not responsible for ensuring that its share price become "stable" -- that is for the investors on Wall street to decide.
It is not uncommon, incidentally, for companies not to offer quarterly guidance. This is particularly the case with companies and in industries that are cyclical (e.g., perhaps they sell more apples in May to August, but practically none in January to April). Berkshire Hathaway offers only a single, yearly report (no quarterly updates), for, as explained by Warren Buffett (its CEO), quarterly guidance merely serves to satiate the manic-depressive Wall Street than to give meaningful insight into company operations.
I think that the fact that Google has chosen not to offer guidance is a good thing, since it is still growing its core business and may go several months with negative earnings (e.g., it might be expending lots on R&D, buying businesses, or building infrastructure) despite positive growth on a yearly basis.
step into line? (Score:3, Insightful)
Oh yeah. Talk like that would surely get me to listen to what they're telling me to do. Boohooohooo. The analysts can't manipulate the stock as easily as they want...
Short term goals (Score:5, Insightful)
Dodge v. Ford (Score:3, Informative)
Though we all like the idea of "do no evil", when it comes to business the idea can be very subjective.
Casino Capitalism (Score:3, Interesting)
Live eviL (Score:3, Insightful)
Since the brokers are demanding Google start to play their evil game, it's no surprise that the brokers also want Google to stop saying such bad things about "doing evil". Even though that "mantra" has no relevance to the stock, its info, its guidance or corporate performance whatsoever. They just want Google to stop being so different from the evil they do every day.
Uh, how about... (Score:4, Interesting)
They said from the beginning that they wouldn't provide typical forecasts.
Nobody forced anyone to buy their stock.
Predictably the stock is less stable, and will presumeably (according to simple capitalism) be valued slightly lower because Wall Street prefers stability.
Done.
Carping about "oh they should do this" or "should do that" is stupid. You bought it, you don't like the conditions or the company, you sell it. If you have lost value, well, you've just been bitchslapped by 'the invisible hand' (plus your own unrealistic expectations).
Caveat Emptor (Score:5, Informative)
Should investors prefer another philosophy they can replace the management team.
If they cannot do that, then they can sell their stock and not be involved with Google any longer.
It's really pretty simple. Analysts have no power within a company other than to make suggestions to management and to offer guidance to investors. They cannot compell Google to do anything whatsoever, so they may as well deflate their chests and get over themselves.
Hold the line (Score:5, Insightful)
Wall St. doesn't like it, too bad. It's about time someone stood up for long term value in this country and pulled their head out of that quarterly numbers mind fuck that's all to common. I'm glad to see Google taking the lead.
Stay out of that line. Focus on value. The share price is grossly inflated right now anyway. It'll go up, it'll go down. You pays your money and takes your chances.
Providing Guidance is Bad (Score:5, Interesting)
So what happens? The company does it's best to juggle the numbers so that they match the estimate. This is one of the reasons that accounting practices are as bad as they are -- there is a huge amount of incentive to mislead.
But not only this conflict of interest, what does a company do if they have inside information that will affect their profits in the next quarter? They can't announce the information *and* they can't give accurate numbers (because they can't justify them). So if you are planning a big cash purchase and you know that earnings are going to be low because of it, you are stuck -- you either mislead the analysists or you give them a hint that something big is coming down the pipe. Both are really bad.
But having listened to a number of analyst meetings, I am constantly shocked how clueless these analysts are. They aren't even aware of basic public information that is published in the newspaper. One company I worked for won a large lawsuit (several million dollars) from the federal government a month before the quartly results were released. It was big news in all the papers. At the analyst meeting for the results, the analyst from Merill Lynch asked where the money came from. "The government lawsuit" was the reply. "What government lawsuit?".
Dear Analysts (Score:4, Funny)
Hot damn, I was RIGHT?!? (Score:5, Interesting)
Damned if the attack hasn't gone full-agressive and public. The message is clear: give us the information we want, or we will do our best to ruin Google. This is extortion.
The analysts need to be regulated again. This is completely out of control.
Investing Basics (Score:3, Interesting)
Investing was about taking money that you have, and using it to help someone else do something you thought needed to be done. Usually, if they proved successful, this meant that the value of the effort you supported grew, and you could sell the portion of that business which you owned if you so chose.
Oh, and if the endeavor was wildly successful, there would enough of a surplus of money you could get paid without losing any of your interest in the endeavor!
Today's investment system doesn't care what the company being invested in is trying to do, all that anyone cares about is whether the stock will A) pay dividends which can be used as income (and this portion of the marketplace appears to be dwindling) or B) grow in value so quickly that you can sell your interest in a matter of days or weeks and make a profit.
Investing used to be about creating products, services, business and livelihoods. Now it is about sucking everything out of a company you can, and moving on to the next company.
Google said (my interpretation) that they want to cater to the original idea of what investing is about.
The guys who drive the current version of investing are trying to force Google into the paradigm by which the analysts even exist in the first place . .
What I don't understand is why any of this surprises anyone who's paying even the least bit of attention.
It's a free market (Score:5, Interesting)
Investing in a profitable company? Horrors, we can't have that. Gives all the crap analysts and brokerage houses are pushing a bad reputation! You need to buy the blue sky buzz word of the month pump-and-dump being touted on TV. Not some innovative company with large sales and a good product line!
I wonder. Google has pissed off DOJ and Wallstreet. It isn't the first time the Wallstreet crowd or the Bushites have played dirty.
In addition, there is a tradition in business of demanding conformity. If you stand out in a corporate culture you are either pecked into conformity or eventually fired for trumped up reasons. Very much like high school in some ways.
It will be interesting to see what happens. As long as they are profitable they do not have to change. Can they last long enough to change Wallstreet? Or are they doomed to cave in?
Wall street (Score:5, Informative)
Other companies that run their own business without WS intervention (i.e. no earning guidance): Coca-Cola, Gillette and The Washington Post.
Re:Beside the point. (Score:5, Insightful)
Google has no responsibility that I can see towards providing analysts with all the information they'd like to have.
Re:Beside the point. (Score:5, Insightful)
Re:Beside the point. (Score:5, Interesting)
Now, for someone to adequately know whether or not a particular stock is good or bad, they would most certainly need to know what the company has planned, and provide such data. You might argue that a stock-holder knew what s/he was getting into while buying the stock, but not providing enough data defeats the primary purpose that one buys the stock for.
By not providing such information, Google is leaving folks uncertain - now, honestly, if your data was good you'd release it because it would do good to your stock price. If you aren't, I'd be worried about what else is going on, and that is most definitely not a good sign.
Google's prospectus claims that the only reason they do not give quarterly guidance is because it encourages short term thinking - now, the analysts and investors would have no problem with it if Google's annual results were as good as they'd hoped. But it was not, so the analysts are claiming that if they had more information (i.e. the quarterly guidance) then this would not have happened.
Ultimately, the analysts are saying, "By not giving quarterly guidance you are not letting us do our jobs properly." While the long term investors (the kind GOOG wanted in their prospectus) may not need quarterly statements (long term investors can look at annual statements and either dump or buy), however if Google needs to survive in Wall Street, they may need to do both, since not giving quarterly statement introduces a lot of uncertainty.
Ultimately, it depends on how they want to grow. Schmidt has indiciated that they want to be a $100bn company, so for fast growth they may have to disclose such information.
Long term investors are going to be very minimal, and they seldom provide the kind of muscle that Google is looking for.
Re:Beside the point. (Score:5, Insightful)
Nowhere, in your entire comment, is the word customer mentioned once. Companies are now beholden ONLY to stockholders. Analysts game the system quarter to quarter to make sure they GET the short term gains. Companies look to the last and the next three months, no further.
and.....
Customers everywhere scratch their heads and wonder why customer service on nearly every level for nearly every industry is absolutely abysmal. Well look no further, there is no driver anywhere in the corprate world that says they need to care.
We all know that media companies and their obsession with DRM is leading to a dangerous and eventually (in the HDTV realm anyway) huge conflict with their customers. But we can't place all the blame on them, Wall Street has told them in the loudest possible voice they have that no customer matters and all thats important is shareholder value. Its very easy to see then how the media companies (and many other companies) can go from trying to please their customers, to treating their customers like theives or like their subjects and not their true reason for being.
Re:Beside the point. (Score:5, Insightful)
I fixed it for you. In case you've forgotten, the stockholders are the owners of the company.
Even if that weren't the case, *you* are not their customer. Your clicks are what they sell to their customers, advertising companies.
Re:Beside the point. (Score:5, Insightful)
Not necessarily.
At least one company [jnj.com] puts the stockholders LAST in the priority list.
Re:Beside the point. (Score:4, Insightful)
Exactly, because that is what the owners want (by way of shareholder voting, boards, etc.). If the owner of a private company wants to look into the long term, fine. If the stockholders (read: owners) want to look for long term gains, great, and that's the direction the company should be pointed in.
Customers everywhere scratch their heads and wonder why customer service on nearly every level for nearly every industry is absolutely abysmal
And for the answer, they should look into the mirror. Customer service is performed when it presents an advantage to a company. Customer service is not free. It requires people, resources and training. If customers were willing to pay more for service, then more companies would provide it. But fact of the matter is, most people buy based on price.
Car sales are probably the best example. How many people buy the car from the dealer that gives them the best price rather than the best service? I paid a few hundred dollars more to buy my last vehicle from another dealer because they provided better service and I could trust them. If you aren't willing to pay more for better service, then you shouldn't expect better service.
We all know that media companies and their obsession with DRM is leading to a dangerous and eventually (in the HDTV realm anyway) huge conflict with their customers.
Then don't buy from those companies. Make sure your friends don't buy from those companies. But don't give a business money, then turn around and say, "but you aren't giving me what I want."
-dave
Re:Beside the point. (Score:5, Insightful)
And Google is saying, "you're not the people who were supposed to buy our stock. Either learn to accept long term profits, or sell now and go away."
While the long term investors (the kind GOOG wanted in their prospectus) may not need quarterly statements (long term investors can look at annual statements and either dump or buy), however if Google needs to survive in Wall Street, they may need to do both, since not giving quarterly statement introduces a lot of uncertainty.
What does Google need to do to "survive Wall Street?" Unlike many companies, Google is highly profitable and has no need for Wall Street's money at this time. The original shareholders have already made their tidy profits, so now Google can sit and wait while the market fumes over their long term strategy. The market will adjust the price of GOOG if they feel it's too high, then they'll get used to the way Google does business and continue their long term holdings.
Wall Street only has power over a company if a company needs their money. For the first time in a very long time, Wall Street is suddenly finding itself powerless. All Google has to do is not blink, and keep the prefferred shareholders happy.
Re:Beside the point. (Score:5, Insightful)
That's why you (and many other) people buy stocks.
Some people buy them for philisophical reasons (think ethical funds). They hope their money goes up, but if it turns out they just invested in 'good' companies, they're happy (think charity with potential profits).
Some people buy the shares simply to own a piece of history (many did, I'm sure, in Google's case). This is why Tim Horton's in Canada went partly public (to make money, but because people would want to own shares, whether it earned them money or not).
Some people buy shares to get the dividends on a long-term basis, whether the share price goes up or down.
Don't assume everyone buys shares for the same reaons.
Larry was very clear -- buy Google shares because you want to give us cash to keep doing what we've always done.
Quaterly guidance != Quarterly statements (Score:5, Informative)
Google cannot legally not publish quarterly statements - they are doing it, period. What they are not doing is predicting in advance what these statements will be, which has always been a guess. All the information you are talking about is available in the SEC filings every quarter [yahoo.com].
Re:Quaterly guidance != Quarterly statements (Score:4, Informative)
The analysts aren't always guessing. They regularly engage in backroom deals where they get early notification about the content of the reports. In return, the analysts are expected to help put a positive spin on any negative news. There have been numerous cases where institutional analysts have pumped stocks on CNBC while their own company is dumping its shares. These guys are fuming because Google won't play their game.
that's the problem... (Score:5, Insightful)
Nope, it's their loot, they could have decided to go elsewhere in advance. This is sour grapes on steroids from the "greed is good" crowd.. Google was very careful upfront to say what they would or wouldn't do, just because they aren't acting like other corporations with short term profits mentality isn't Google's fault, it's Wallstreet's fault for thinking they would, based entirely on something they dragged out of their lardish butts, because it wasn't based on any actual data. I think it's funny really, because you could see those neurons all scrambling to throw money at google, they got completely coldcocked.
Google said that they actually didn't know what they would be doing in the future, just exploring wild new technology and see what might work and what might not. It is loosely based on advertising sales, and that's it. Google is an *exploring new tech* company. Every single exploration left turn or right turn is not guaranteed to make some investor money. If the investors didn't understand that going in, perhaps they should have taken their money and started their own business and done something useful and productive instead, ie "get a job".
Frankly, the entire idea of investing has just turned into wild ass speculation based on the really quick buck and frantic share turn arounds. They should pass a law requiring a minimum hold period on shares between trades anyway,like one or two years, not a few hours or days or weeks, to discourage short term profits casino mentality. Put the "invest" part back into "investing".
I have zero sympathy for the stockholders and analysts in this case who were looking for the quick easy buck. None. There are plenty of other enron-esque companies out there for them to choose from if that is what they are looking for. It's like the bulk of the stockmarket,so there should be enough there for them to check out. The few companies who DARE to try something quite different in a business model and to perhaps follow at least semi ethical guidelines are *quite rare enough* without the jackals and hyena scavengers braying at them.
Re:Beside the point. (Score:3, Insightful)
What analysts and investors think or project is not only meaningless but harmful. If they were good at running companies, they'd open their own Google.
Google is cor
Re:Beside the point. (Score:5, Insightful)
In many ways, this is a GOOD thing for the health of a company. As anyone who has been apart of a publicly traded corporation knows, you are tied into the quarterly system. When you can buy supplies, capital equipment, and sell product is entirely based upon the quarterly system. There has been more then one instance where I was prevented from moving forward with a project because they didn't want to spend the money that quarter. They happily let me spend to my hearts content the day after the quarter ended though. That is NOT a healthy attitude for a company to have, but it is the attitude you NEED when your stock price is tied to quarterly reports.
Personally, I think that there is a lot of merit in what Google is trying, especially if it results in a company that is significantly more capable of long term planning. It might not work for some companies, but it might very well work for Google. Cutting themselves free from the quarterly mentality might very well give them the edge set much longer term plans and goal then their competition can.
Under no obligation to provide "guidance" (Score:5, Insightful)
Companies are under no obligation to provide "guidance" on future earnings or growth of the company. A company is obligied to publish its 10K and 10Q forms as well as other required SEC filings. These documents - for those willing to do the work - provide more than enough to analyze a company and its business.
In fact, the "guidance" you and the analysts are demanding has been the source of untold harm. Remember, it was Enron working to ensure that it hit its earning's guidance and estimates that led to the fruad to keep the numbers on track. It is trying to keep earnings estimates on track that leads many a company to dump staff to "cut costs", rather than accept "lumpy earnings".
It should be noted that there are other companies that refuse to provide guidance. Companies like Berkshire Hathaway (i.e. Warren Buffett's company). What the analysts don't like is that they aren't in control here. That in analyzing Google they might actually have to do some work.
Like many of those at the Motley Fool, I applaud those who refuse to give into the demands of the analysts and give earnings guidance. Of course, this could be a case of trying to "get even" with Google. Remember, they were the folks that selected the "Dutch Auction" for their IPO and had to deal with the investment bankers and analysts who were upset that at market rather than their experts got to set the price for Google shares.
Yours,
Jordan
Re:Beside the point. (Score:5, Insightful)
Shareholders can whine and complain if they want. They're still going to be presented with three options:
1. Sell
2. Don't sell
3. Buy more
(Of course, they could short/put it to offset their losses, but that's beside the point.)
Traditionally, shareholders have weilded a lot of power over a company, because a drop in price significantly inhibits a company's ability to raise capital. The problem here is that Google doesn't need to raise capital. Let me repeat that, Google doesn't need to raise capital. Until a time arrives that they do need to raise capital, Google can continue to ignore the demands of analysts and shareholders alike. (Save for the preferred shareholders, that is, who are directing the company.)
Re:Beside the point. (Score:4, Insightful)
You think that because this is the way everyone else does it, then Google HAS to do it that way too. If they refuse, you sputter and spit and insist "But...but...but... you HAVE too....!!!!"
No, they don't. If you don't like it, don't buy their stock. If the analysts don't like it, they can issue "sell" recomendations or decline to issue a "buy" recommendation. But the fact that analysts want information to make their decisions on doesn't ethically or leagally compell Google to offer it. The fact that some people chose to buy Google stock doesn't ethically compel Google to act in a manner that those shareholders find proper. If those same stockholders feel that Google is going to lose money or market value, they'll abandon Google in a heartbeat and recoup whatever portion of their investment they can get back. They certainly feel no obligation to stick with Google. Why, then, should Google feel any obligation to satisfy them? Google simply offers a chance for people to ride on their coat tails. That doesn't require them to offer a chance to decide where those coat tails are going.
(You might argue that this conflicts with certain laws, and you'd be right in some sense. The problem, however, isn't with my analysis. It's with the laws which interfere with the free market.)
More to the point... (Score:5, Insightful)
More to the point, earnings guidance is not even actual information. It is simply a guess. Google certainly has no responsibility to provide that to analysts or anyone else.
Re:Beside the point. (Score:5, Insightful)
Let's nip that in the bud. (Score:5, Insightful)
Not.
They are obligated to do precisely and only what their prospectus, corporate charter, and public writings and speech say they will do. They are not obligated to give analysts "guidance" or play any of the other foolish games Wall Street wants them to play.
This talk of stability in stock price is just whining. It's also a key test for Google, who will now show that they are either sellouts or true idealists. While I don't hold the same ideals as they do, and don't think selling out for the kind of money they got is such a bad thing, I find the whole thing interesting as a study in human nature.
Re:Let's nip that in the bud. (Score:5, Interesting)
Google's majority shareholders are the founders, effectively they do what they want. The shares they sold have limited voting ability, thus limited ability to direct how the company operates. Investors knew, or should have known, those very important facts before investing.
Wall St. is just very used to getting their way, so when an organization doesn't toe the line they get pissy, as another poster mentioned this is a test of Google's business ethic. Either they'll stick to their guns or fold. IMHO folding will be the first substantive sign that Google as a business is morphing into our next technology monopoly that 15 years from now will be the equilivant of MS now or IBM in the 80s.
l4h
Re:Let's nip that in the bud. (Score:4, Insightful)
There's also something very different with Google's Balance sheet. No long-term debt. As for short term debt, they are carrying open payables reasonable for a company their size, so that's not a factor. Most public companies depend on their stock performance to influence their debt rating. This affects both what they can borrow, and current debt they are carrying.
Google has no reason to fear any impact on their company operations due to their stock performance's affect on debt rating, because there is no long-term debt that can be called in. When a company like Enron has a public relations disaster, their stock price tumbles, and their debt rating sinks to junk status. That's the force that destroys a public company. As they are still not carrying any long-term debt, it seems unlikely they plan to take on any in the near future, so they can get away with "their way" until that situation changes.
Re:Beside the point. (Score:5, Insightful)
SELL SIDE Financial Analyst Mentality (Score:3, Insightful)
It is nice to have your cake and eat it. It is nice to provide reliable analysis based on facts. Plug the snippets of information you receive into a spreadsheet and press the VBA button (because all such macros are in Excel, for better or for worse). You get a reliable forecast and lots of happy customers that compar
Google's stock a big circus event (Score:5, Insightful)
Re:Beside the point. (Score:5, Insightful)
That's FUD (Score:5, Informative)
I suggest you read this article.
http://news.com.com/2102-1030_3-6030223.html [com.com]
Summary: Their stock sales were planned over a year advance. They actually setup the schedule before Google went public, so that n00btards like you wouldn't be able to say "ZOMG, teh c0nsp1racy!"
AFAIK, just about every corporate officer signs up for a 10b5-1 plan so that they don't have to deal with accusations of insider trading. The funny part, is that the linked article I gave you has some idiot analyst saying the same thing you are.
Allow me to say this again: The stock sale was planned over a year ago. It is an unfortunate coincidence that their stock sale happened at the same time as any bad/good news.
The fact that Google's stock dropped 60 dollars per share in less than 10 seconds is interesting, but the rest of your post is over rated.
Re:That's FUD (Score:3, Interesting)
Re:They'll give in ... (Score:5, Insightful)
The mantra to 'maximise shareholder value' has never had a particular timescale defined, as far as I know.
Justin.
Re:They'll give in ... (Score:3, Insightful)
So what you're saying is, "It would be unfortunate if anything happened to your store one night. Like a fire. For a small fee I can ensure that doesn't happen."
As a poster just up the way said, boo hoo. So long as Google isn't violating SEC rules or regulations they can do what they want regardless of the consequences. If they get hurt by it, that's their problem. If the shareholders get hurt, they will decide Googles fate, not t
Re:They'll give in ... (Score:3, Insightful)
GOOG told the investing community, point blank, that they werent providing guidance. Dont like the ground rules, dont buy.
Re:They'll give in ... (Score:3)
The big tech companies are very very afraid of Google, not because Google is going to eat into their market or revenues, but rather because Google is showing the world that it is possible to build a hugely successful business by doing good, making your employees happy, and challenging the status quo. These three things go completely agains
Re:They'll give in ... (Score:4, Interesting)
Re:But, a rebellion against all companies is going (Score:3, Interesting)
Real Estate outperforms Stocks... (Score:3, Informative)
That said, when you buy real estate, going 500% long (putting 20% down) is EXTREMELY conservative, and 1000% long is extremely common, even in business settings.
In the stock market, you can at MOST go 200% long.
In addition, the cost of capital (borrowing the money) is MUCH higher for stocks... You might be paying 7% or 8% of Margin Interest, vs. 6.5% on mortgage interest.
Basical
Re:Real Estate outperforms Stocks... (Score:3, Interesting)
Real Estate does out perform the stock market, because it is lower risk and people give you money at lower rates...
Yeah, but the main thing that is driving real-estate is inflation (which BTW, is greatly understated). That is a very dangerous game to be betting on right now. People have always done well investing in realestate because the fed always pushes more money into the economy, which always creates inflation that drives up the value and also eventually drives up peoples pay. But today with wage
Cobblers. (Score:3, Insightful)
By the same token, I only give to two charities: I could give to lots more, but failing to do so does not make me evil.
Justin.
Re:Cobblers. (Score:3, Insightful)
Unless you are living on the streets, eating out of dumpsters, wearing rags, you are not giving everything you can, and I don't think you can argue that anyone else should, no matter how much it would benefit your personal chosen cause.
Justin.
Re:Do no Evil my a$$ (Score:4, Insightful)
This isn't Google being evil, its you not willing to file paperwork.
Re:Do no Evil my a$$ (Score:3, Insightful)
Even though I assume that you do a great job on that website, what obliges anybody in the world to help you out based on the fact that you do non-profit work? You might just as well oblige me, or any other slashdot geek to support your cause one way or the other, just because
Google has no obligation whatsoever to help
Re:Do no Evil my a$$ (Score:5, Insightful)
There's your problem - right there. I also only donate to registered charities, and it's not for the tax deduction it's for the accountability.
Re:Do no Evil my a$$ (Score:3, Insightful)
2) A tax deductible donation is hardly cost free. Surely, as such an ardent philanthropist, you've noticed this on your own taxes.
3) As someone else has pointed out, even in the worst light, not giving you free advertising doesn't remotely constitute "evil". Helping the Chinese government suppress information about Tibet does.
Re:Do no Evil my a$$ (Score:4, Insightful)
You have GOT to be kidding me. You expect a company to donate cash or services to your organization, without proving to them that you follow the law regarding non profit organizations?
I could not donate to an organization that espouses even the purest of motives if that organization can't get its act together and file as a real non-profit, accountable to the law. I might as well be giving money to a con artist.
There are a vast pool of eligible non-profit organizations that ask for Google's money. By only donating to 501(c)3 organizations, Google is protecting itself and has a better chance that the money/services will not be ill-used. The tax-free status of donations is intended to encourage giving, so both Google and the organizations they donate to get something out of the transaction. Were you an eligible 501(c)3 organization, you would hardly call it slimy - you would hail it as a progressive tax code.
In giving money to non-profits, a company MUST look at the return on investment. If giving $1,000 worth of advertising to you helps 100 people, that's nice. If there's another organization that will help 500 people with that $1,000 investment, then that's better. You also need to look at whether the non-profit's goals are similar to your own. It could simply be that Google doesn't donate to any organizations regarding reproduction simply because they want to remain neutral. They don't have to publicize their policy, nor do they need to explain themselves. You are asking for money, and then suddenly you claim that you deserve it and they are such pigs for not donating to you? What rights, exactly, do you have to their money again?
As far as your implication that donations of advertising are "free" and move moeny from one pocket in google to the tax free pocket, consider what you are asking. You are asking Google to give away free advertising to any organization that claims to be non-profit. If google does that, they will have more "free" ads shown than paying ads. Suddenly it won't matter what tax break they get - they won't have money in the first pocket to move to the other pocket. They have to set a limit (for financial and legal reasons) on the amount of "free" advertising they can donate to true non-profit organizations. That limit, I imagine, is reached and therefore they don't have money left over to give to organizations that merely claim non-profit status without actually being non-profit. This is merely one of the consequences of what you are asking them to do - it's much more far-reaching and complex than this, of course.
If I were Google, I'd be wondering, "Is this an advertisement for Plan B? Should I be supporting an organization that claims to be non-profit, but will not take the legal steps necessary to demonstrate that commitment?" Actually, I'd probably not even get that far. "Oh, somone else wants money ear-marked for non-profits, but isn't a non-profit. Time for the round file."
-Adam
Re:Ethics are overrated. (Score:3, Insightful)
In a nutshell, I think it's because they have a concept of themselves as agents, as distinct individuals acting in space and time. We are the stories we tell about ourselves.
Now, if your brand of ethics is based on an idea of benevolence, you might think it is ethical to decide for those people, based on the most superficial observations, what is good for them to do or not to do. On the other hand, to my way of thinking, this is intruding on a story that does not
What's obvious? (Score:3, Insightful)
But I do wonder whether it is wise to base business transactions on "higher principles." I mean, when you hire a plumber, do you really want to discuss his personal views on the value of good pipes to society and so on?
Re:What you get for rocking the boat (Score:5, Insightful)
Nonsense. Don't just throw meaningless "don't rock the boat" and "can't fight city hall" and "it was a fun ride, but" statements at Google based on hype and buzz, just because you can't understand how they succeed without conforming. No one ever did anything great by sticking to the "rules" that are propped up by people riding on the coattails of the last person who did something great. Your can't-do attitude is a self-fulfilling prophecy of self-doubt that has killed more dreams in the history of humanity than any real obstacle.
The next-quarter-result mentality comes from the top. It would require Google's management to cave to this Wall Street whining, which, as powerful as the "Wall Street community" thinks it is, doesn't mean squat to them. Larry Page and Sergey Brin own controlling stock in Google, and they're interested in long-term benefits (assuming they don't sell out). The only power the analysts have over them is a measure of influence on the most fickle of Google's investors, and any negativity resulting from that will blow over and balance out in a relatively short period of time. Google's got a good long-term plan, and if they stay the path there's no reason they can't prove you utterly wrong.
Re:DotCom Collapse 2.0 (Score:3, Insightful)
Google is overvalued because the have no product. They only have a service. There is some college kid right now working on a technology that will put Google to shame.
Hate to break it to you but service-based business is nothing new nor will it go away.
There was search long before Google, there will be search long after Google and it seems Google is making the mistake that most tech companies make when they hit it big. They assume that nothing will change and they will continue to make money.
This is
Re:DotCom Collapse 2.0 (Score:3, Insightful)
Besides, the growth rate was 80%, and the PE multiple should be (about) what the growth rate is.
IT looks positively cheap to me. I think that people see a multi-hundred dollar price per share, and panic.
I guess that BRK.A would be completely overpriced then.