GOOGLE INC.: BUY, SELL, OR HOLD?

Live Case

John Sutherland kept taking trips to the water cooler. He was not going to figure out where

he  had  miscalculated  by  continuing  to  stare  at  his  computer  monitor.  The  numbers  had  been

checked and rechecked, but the conclusion was not what he had expected. No analyst at Pirsig

Financial had ever given Google Inc. (Google) a rating lower than “strong buy.” But somehow the

narrative Sutherland’s numbers had formed demanded a reconsideration of that rubber stamp.

As a first-year analyst, he did not want to be the rookie that gave offbeat ratings in hopes

of garnering attention. In his mind, Google had been growing steadily since whiz kids Larry Page

and Sergey Brin had founded the company in 1998. Furthermore, its growth had been built on a

reliable, market-dominating product: a unique and effective search engine. So why weren’t these

projections showing a more positive picture of Google’s growth potential? Or was he making some

faulty assumptions? If he were advising a value investor who was taking a look at Google, would

he recommend the investment at today’s stock price or not? And why or why not? He kept staring

at his calculation of discounted cash flow projections, hoping  that the answer would somehow

materialize before his eyes.

Live Case Instructions

Analyze Google’s current situation—the state of the company today. What can you discern

about Google’s strategy? About Google’s competitive position? About Google’s prospects for the

future? How do these inform your assessment of its current stock price?

In the real world, all relevant case facts and information will not be handed to you. Analysis

of this case requires the collection of data and information from public sources. In doing research,

you will cultivate your skill in making sense out of a tremendous amount of information—or lack

of  it—and  determining  what  is  relevant  data  that  ought  to  guide  your  strategic  analysis.  The

ultimate test of your skill as a strategic analyst is whether you have the tools and judgment to make

sense of the information available and to make strategic decisions in the face of a great deal of

uncertainty.

Good places to start collecting information include the company website, its annual

report and financials, and comprehensive databases such as Hoover’s and Bloomberg. If you think

that  a  particular  piece  of  information  is  relevant  to  our  discussion  of Google’s  strategy,  come

prepared to discuss it.

  1. Practice your business strategy skills as you consider “Google Inc: Buy, Sell, or Hold?” Then join the discussion forum to share your analytical insights on the following in about 100 words each:
  • Review Google’s corporate webpage and annual report. How would you describe Google’s strategy?
  • If you were to prepare a competitor analysis, how would you define Google’s industry? Who are Google’s competitors?
  • If you were to prepare an environmental analysis, what are the major trends impacting Google’s industry? What are the growth prospects for Google’s core business?
  • Do you think Google’s industry is a competitive market, in the technical sense? Does Google have a sustainable competitive advantage in internet search?
  • Would you recommend investing in Google? Why or why not?
  1. Comment on the response of any of one your peers in about 75 words, using five steps for reflective peer response as a framwork. (if you are the first to post, then come back in a few hours to answer this part).

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