Google is King of the Hill (For Now)

Had some updating problems so a couple of these posts are a bit late.

According to last Friday's Wall Street Journal:

"Google said it plans to sell 14.2 million shares of stock, valued at $4 billion. The surprise move about how the Web-search company might plan to use the proceeds, which would more than double its cash balance. Google shares closed down $5.11 at $279.99, still more than three times their IPO price... was characteristically tight-lipped... Google said it intends to use the net proceeds from the offering for "general corporate purposes, including working capital and capital expenditures, and possible acquisitions of complementary businesses, technologies, or other assets." ...

Amid all the mystery, the tech company seemed to leave a clue that suggest the size of the offering wasn't arbitrary by stipulating that the number of shares Google plans to sell is 14,159,265. Those are the first eight digits which follow the decimal in the value of pi (3.14159265)...

The share price has soared since [the intiial public offering], as the company has consistently surpassed analysts' expectations for its earnings."

Apart from the fact that my site still doesn't seem to show up in google searches despite the friendliness of all other search engines, Google's success is undeniable. However, it is literally impossible for me to justify purchasing the stock at its current levels. This is not to say that I am saying that it must go down--it will probably continue to go up for some time--but I have no way of predicting when it will go down. Moreover, at its current P/E (price to earnings ratio) of 82.74, according to Yahoo! finance, the company's profits would need to quadruple over the next several years, and then its earnings growth would need tos stay quite high in perpetuity.

However, two things still jump out. The company continues to do new, unique, and infinitely interesting things. Just the other day I was lost and I text messaged Google's SMS service, and within moments I received detailed directions back to my cell phone. Google maps and Google earth . Google continues to turn a profit, though I have not analyzed what its biggest sources of money are. It is also amazing that this is a company with only 3000 employees. Their market capitalization is larger than Time-Warner. This boggles the mind. To remain ahead though they must create more barriers to entry for their key businesses.

In the end, what the future holds is unknown, though my portfolio will probably be sitting on the sidelines (though with such a large and growing market cap my index funds hold plenty of Google). Microsoft is trying to rev up its competition, but Google appears to be so nimble, and so formidable and amorphous opponent, that they are literally just having fun, picking numbers of shares to sell based on pi.