GOOGLE INC.: BUY, SELL, OR HOLD?
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 Sutherlands 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 werent these
projections showing a more positive picture of Googles 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 todays 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 Googles current situationthe state of the company today. What can you discern
about Googles strategy? About Googles competitive position? About Googles 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 informationor lack
of itand 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
Good places to start collecting information include the company website, its annual
report and financials, and comprehensive databases such as Hoovers and Bloomberg. If you think
that a particular piece of information is relevant to our discussion of Googles strategy, come
prepared to discuss it.
- 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 Googles corporate webpage and annual report. How would you describe Googles strategy?
- If you were to prepare a competitor analysis, how would you define Googles industry? Who are Googles competitors?
- If you were to prepare an environmental analysis, what are the major trends impacting Googles industry? What are the growth prospects for Googles core business?
- Do you think Googles 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?
- 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).