Google Watch

Isn’t Google just adorable? Those new fangled Web folks refuse to play by the Wall Street’s rules, and that’s why the Street doesn’t like them. Even though the stock has soared on a gazillion analyst upgrades, deep down, Wall Street isn’t happy. You see, those uptight East Coast squares don’t “dig” what Google is all about. Google does things their Own Way, and they’re not afraid who knows it.

Like when other companies go public, they’re supposed to use some stuffed-shirt investment bank crammed full of Skull n’ Boners. Not Google. They did their own IPO. You heard right. They used a Dutch auction. Cause it’s democratic. None of that screw-the-little-guy business-as-usual stuff. Yes, it’s true, Google did cut the size and price of the IPO (at the last minute), and it reserved $450 million for nine insiders. Also, the Gooligans made a special class of stock that has ten times the voting power of the common stock. But those are messy details. The larger point is about attitude, and Google’s got it.

For example, Google has broken Wall Street’s most sacred rule—they refuse to provide earnings guidance. Imagine that! They’re not afraid to stand up to those bullying Wall Street analysts. At their Analyst Day, Google said that their CFO would speak. But it turned out to be the company’s chef—the Chief Food Officer. Get it? The Chief Financial Officer didn’t even address the analysts. Investors have to understand that Google is an unconventional company. It’s like what Larry Page wrote, “Google is an unconventional company.”

When they had their first public earning report, the Googloids released it early on their Web site (www.google.com, incidentally). Youch! That must have infuriated those arrogant Wall Street sheeples. And after Google blew away analysts’ forecast for the fourth-quarter, you can just imagine how angry Douglas Anmuth of Lehman Brothers was when he had to raise his price target from $190 to $230. Or when Prudential raised their target to $260. Or Goldman Sachs raised theirs to $265. On the inside, it must have killed them.

But that’s ancient history. Now Google’s stock is up to $300—a 250% gain in less than a year. But don’t worry, success hasn’t changed them. The Google Dolls are still mavericks. They’ve said that they’re not going to split the stock. (Are they allowed to do that?) Anmuth is showing a brave front. Last week he raised his price target yet again (to $350 from $275). Smith Barney is up to $360. How high will they go? I’m sure Wall Street will give those nerdy whippersnappers their comeuppance. Until that time comes, Jim Cramer quietly tells us “Google’s still cheap!”

Perhaps Google is changing their ways. Google’s CEO, Eric Schmidt said, “One of the great secrets of Google is that we are not quite as unconventional as we say we are.” Maybe so. As for me, I’m waiting for Thursday’s earnings report. The consensus estimate is for $1.20 a share. I have no idea what it will be, but whatever it is, I hope Wall Street won’t be too angry.

Posted by on July 19th, 2005 at 8:46 am


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