Above the Crowd

Archive for July, 2010

On Google, Growth, Pricing Power, and Valuation Multiples

July 15, 2010:

Last night, Google reported financial results for the second quarter of 2010. While revenue growth was up 24% year over year, revenue was fairly flat compared with Q1 of 2010. Moreover, earnings fell short of average street estimates sending Google down $20 per share (4%) in the aftermarket. Based on current estimates (which might change tomorrow), Google currently trades at 18 times the street average for 2010 earnings, and 15.5 times the same number for 2011. These represent price/revenue multiples of 7.5 and 6.5 for 2010 and 2011 respectively. For a long-term tech investor, these valuation multiples seem surprisingly low for a proven market ...

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Google’s Acquires ITA: Will Deeper Vertical Integration Lead to Higher Revenues?

July 8, 2010:

“It’s funny how fallin feels like flyin, for a little while…” – Jeff Bridges, Crazy Heart Soundtrack On July 1st, Google announced its intention to acquire ITA Software . ITA owns a primarily B2B airfare search and pricing system called QPX. Several of the leading online travel sites, like Orbitz, Kayak, and Bing Travel, use information from QPX to power their airfare search. Many in the industry view this move as a seminal event in Google’s history, as the company makes a decisive step from being a general search engine, into more structured vertical search. Certainly, Google already offers vertical search in Images, Videos, Maps, News, and several other categories. Despite ...

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