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Reggie Middleton's Observations on Google's Dramatic 3rd Quarter 2012 Earnings Release
Here are my thoughts on Google's Q3. I'm at home with my ill daughter and a hobbled PC that refuses to do rich text, so an introduction will be posted here and a link to the full review will be included that points to the full review on BoomBustBlog.Before I get into them I will like to reiterate that many pundits, investors, analysts and traders still have no clue as to the type of company that Google is. Imagine a private equity firm that has consistently put out the leaders (as in the number one company) in several industries, every 3rd year or so for 10 years straight. Now, take that private equity fund and give it it's own operations with some of the smartest engineers and strategists in the world, and have them spend 1.5 Billion (that's Billion with a "B"") in R&D annually to discover new things. Now fund that private equity fund and R&D camp with cashflow from the world's largest automated web advertising firm, whose closest competition is so far away as to barely even be known for its wares by the average person. Now, add to it the worlds fastest growing, largest and most technically advanced mobile operating system. Then add to it the largest patent portfolio and 4th largest handset maker in the world (remember the mobile industry is where its at now). Then add to it the largest and by far the most prominent digital media destination AND publsihing property in the world. Then add to that the largest consumer and enterprise cloud operations in the world.
Finally, add to the mix the largest, most oft use and most entrenched search engine which (when combined with the cloud properties) basically makes this company the defacto gatekeeper for digital data for the world.
What would you have with this new world conglomerate? You'd have Google, that's what you'd have. Now, on to my anecdotal quips on Google's dramatic Q3....
Enterprise wide margins have dropped. I suspect the Motorola acquisition and the influx of mobile revenues, which alter the supply-demand landscape dramatically, thus dropping pricing power for the near to medium term.
See the rest of the full review on BoomBustBlog.
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"..from the world's largest automated web advertising firm.."
great biz model Reggie, to which they've attached the worlds largest automated cheap credit ATM to keep the Ad Revenue model from collapsing
please keep up with the desperation in the GOOfball camp, you're so exposed with your shilling you're looking like the Emperor with no clothes on with a tiny willy too
Go suck on the results, they suck (like your articles)
leaking the Q3 Observations before they're posted on BBB?
icwutudidthar
Gmail is a great invention Haill Go Goo!.. as previously mentioned Chrome makes IE look good.
Reggie, let me guess, you were an early investor in Lotus 1, 2, 3.
What you failt to grasp is that once paid click volume slows down, and it will slow down, revenues at google are going to collapse because CPM's are in terminal decline.
No amount of volume increases in lower priced search will EVER be able to make up for what was once a golden goose business or GOOG.
You will see GOOG's multiple compress from here, as it goes ex growtw.
The ony saving grace might be Google Fiber.......hahahahaha just fucking kidding biatch!!!!!!
So do you believe that paid click volume will slow down with the proliferation of inventory and demand through mobile for the industry leader?
The real bear argument for GOOG is margin compression, not volume reduction in an explosively growing market - that and government intervention. Then you have to contend with new revenue models - which Google is leadng the pack. If youtube is succesful, then there's TV ad revenue, mobile ads will easily outstrip desktops - agan the question is margin, then there's fee income - that's what's disturbing MSFT in regards to GOOG SaaS inroads.
What happens when GOOG decides to monetize the world's dominant mobile OS? You guys are stuck on Google as a search engine and fail to see the whole picture.
There are plenty of realistic bear arguments for this company but I'm not hearing good one's here.
"So do you believe that paid click volume will slow down with the proliferation of inventory and demand through mobile for the industry leader?"
This is an example of what I meant by "worthlessly simplistic analysis." Google is NOT the "industy leader" in social networking. And it is failing miserably, and falling further behind, in its bid to go there at all.
Paid clicks are almost anathema to social networking platforms. Google's entire business model is failing, it's margins rapidly declining. It may turn things around some day. It'll take years though. In the meantime...take your profits, or cut your losses short, as the case may be.
Methinks you are over your head here. You don't understand what is being said and then you take your misunderstanding and use it to insult. I never mentioned social networking, did I? Google is the industry leader, by far, in mobile ad revenue and inventory - particularly after their acquisition of AdMob. Apple attempted to replicate by going on an acquisition spree, but didn't have the synergies through search, etc. that Google had so they are failing and falling farther and farther behind.
I have no idea what you think this has to do with social networking but you should keep the invective to a minimum until you understand the business and the analysis.
Until you can convince me that people don't try to ignore and block ads, then I will consider Google's business model doomed, epecially as mobile increases the premium on limited screen real estate (no room for spammy ads!).
The CTR rates for ads have collapsed from 2-5% in the 1990s, to 0.1 - 0.3%. People don't like this shit!
The internet is fundamentally different from the TV, because we go there to proactively seek knowledge with our mind full awake, by having control over what we click, unlike the TV where we passively absorb and our mind goes to sleep.
Reggie you apparently fundamentally don't understand the knowledge age:
http://www.coolpage.com/commentary/economic/shelby/Demise%20of%20Finance,%20Rise%20of%20Knowledge.html
See the "Knowledge Investing" section.
I've been using adblocker software for so long that I don't even remember what a pop up ad looks like.
I use the net to avoid ads (commercials). The fact that GOOG's business model is to make money on net advertising has always been puzzling to me. They use the net to make money on the one thing I go to the net to avoid? Something doesn't add up here....
That is a helluva good comment Shelby.
"Reggie Middleton's 3rd person refrence article"
Reggie doesn't say anything. He doesn't tell you to buy the f'ng dip. You first have to pay him, before he tells you any actionable trades. Otherwise, he's just spewing his crap about google apple sauce. If you listen to ANY of his free google apple 'rants' on ZH. You're bound to lose money. Like he said before. You gotta pay him to hear his real insights. So in other words, he's just promoting himself here with teasers and bs. Only stuff I read about from Reggie are his banking models and euro crisis. This goog aapl is a bad call gone wrong ages ago, and he can't backpeddle anymore.
Central Financial Planning does not pick and choose what stock to screw. Don't blame goog on CFP. Central Financial Planning affects everything.
I totaly understand what google is, and what they are capable of. Their ad based revenue is the best of the best. Second doesn't even come close. People talk about groupon, but remember Google tried to buy groupon at one time. Where is groupon now? Google got lucky that groupon did not want to be bought out by them. Motorola more than likely dragged down Googles earnings overall. If patents are all what google wanted. Fine, I see it as a one time charge. But if google decides to run Motorola like a product company. It's like throwing good money after bad. Go ahead, throw your ad revenues into it. They've got the money to burn. I would love to see them go hardware with Motorola. Samsung and the gang would be happy. I would love to see how much money they lose on hardware before they shutter it, and stick to being innovative.
Alas, I feel it is too late anyways. They went rogue the minute they released their "Don't be evil" motto, while doing hypocritical things at the same time. Hell even Microshaft seems more intouch with the end user these days, after they released their default Do Not Track for IE10. But leave it to the Assholic Advertisers to screw Microshaft up, in order to pry into peoples lives.
Google Ad's = Advertisers = Tracking = F You GOOGLE. The only track you'll ever get from me, is me giving you a Cleveland Steamer.
Look fuckstick let's start to understand that paying for advice isn't a bad thing. And poo pooing his calls is fine. Talking trash is part of trading.
But if you don't have any money riding on it, what do you care? If you put money on old free news...well you get what you paid for. NOTHING. It's like listening to the whiners that adamantly refuse to join the Time Sykes party of...well, one of the most profitable traders I've ever met. Sometimes paying for the right newsletter nets you a gain. Reggie isn't selling a penny millionaire service. He's selling an investment research powerhouse, and something I haven't seen in years. He is in it for the Looooong investment.
Here's a clue about investing or trading or even sitting in the peanut gallery. You have to go find a rationale to take your money and give it to a company to build a portfolio. To do that without losing sleep, you do days, weeks, months of research. You know. Work. After a couple of decades of doing that, losing money and gaining plus understanding working and non working business systems, you then play with real money like it's breathing air.
Otherwise I agree with everything Reggie says. But being a master engineer my rebuttal is a simple glimpse at the past "google's".
High R&D, low profit, saturated cell phone market and it gives away it's products for free = Nortel, Mitel, Cisco, 90's Microsoft, Yahoo, Palm, Redhat.
Tech is a great five year plan for making bank, but once the well is dry.
Now it is a matter of counting down the days like Nortel employees did before getting assraped by holding stock options worth 90% less in some cases than their strike price.
What determines the company's future now is one thing. The amount of pain the employee can take on April 15th. The government itself will destroy the company by proxy of destroying Google employee's now.
http://mikevolker.com/shares-vs-stock-options/
Read this and become wiser before opening that piehole chump.
The employees dumping their shares to
I don't put money on old free news. I can dissect the good information and the bs information that reggie puts out on my own. I just point out the subscriber part, so others new or old won't get burned.
No I don't have any money riding on it, but why can't I care? Do you have money riding on it? Is that why you care? But opinions are like assholes....everybody has one. So my piehole will continue to remain open, thank you very much.
If that link was meant for me. How relevant is the CRA rulings to Google? Did Google move to shitlickcon valley north? Does 1000 google and apple employees in Canada make a significant impact on their financials? When they are using the Double Irish to begin with?
If you listen to ANY of his free google apple 'rants' on ZH. You're bound to lose money.
Advertisements and free promotional offers are meant to attract people, not to put them off.
I can give you some really actionable and money making advise, if you pay me money too.
"So in other words, he's just promoting himself here with teasers and bs. "
So how does that make him any different?
Google is - to some extend - like Walmart. You can't bet against it if it comes nearby.
er, isn't that precisely what the market's just done, bet against GOOnbubble, down 10% in 1 day???
Reggie - best to your Daughter, hope she gets well soon.
Your PC - What? You don't have a Mac as a backup and for "research" purposes? Ribbing you. You can pick up a little Acer netbook with full Windows 7 for $300 in a pinch - and 'ere long one with Google Chrome O.S. for $299. Not sure how the Google O.S. will handle rich text, CSS, or Java.
Google reminds me of Apple in that they have one or two primary means of income that could be superceded quickly. You make some good points here about their width and diversification though.
Having seen Motorola, Nokia, and Dell and HP get killed the past three-five years by Apple makes me wonder if the same can't happen to Apple itself - or Google.
The lesson that Jobs learned and embraced was not to be afraid to change course if that is what is necessary to win the race. He took apart and completely redesigned his OS when he realized what was happening. He did it again for the iPhone and iPad. It remains to be seen if he left sufficient DNA of that kind in his company.
In the medium term, I think he has. However, it is never easy to make that kind of "U-Turn" decision, not just in business, but in life in general. The human brain it seems is programed to avoid change unless absolutely necessary.
They have lots of people who worked under Jobs and have zero desire to rotate out.
It can happen to any company, it does not matter what name is on the stock certificates.
As for the PC, I have many as you could have guessed, but only one notebook with me at this house. I take the time to explain this because I finished the post on my site with my Galaxy Note 2 since my PC is only pasting clear text - that's right, I did it with my smartphone. Go to the link and see what is capable with recent smartphone tech. That probably would not have been doable on the iPhone 5 which is in my pocket right now awaiting return once my daughter gets better.
Wow, you posted this crap from your smart phone Reggie?
pity the phone can't upgrade you to something smarter
I can do it with an iPad so I assume you can do it with an iPhone.
iPads and iPhones have very limited browsers (Safari) and the iPhone screen is much too small to do anything practical with. Try the Galaxy Note 2 and compare to the iPad and iPhone. You'll be impressed.
Next time just send it PENDING REGGIE QUOTE :)
(Hope your kid's better soon...)
Hobbled PC?
Dog ate my homework?
funny how reggie defeats his own analysis. he has a 'hobbled pc at home'.....so reggie has a business and cant afford a backup pc...? or is it that most americans are not buying pc's but using their cellphones which make google less money. google revenue will go down eventually as people stop using their 'hobbled' pc's and go mobile.
Since AT&T talked my Son into a snazzy smart phone my Son uses his P.C. less and less. My eyes are too old (or patient?) to browse the web on a 3" screen but he and his friends are hooked on it. Zoom in on the page to what they are interested in; the rest of the page, ads and links, are ignored.
His cohort are inveterate pirates; they see nothing wrong with free music, movies, key hacks, and sharing.
Perhaps as government and the corporatocracy have worked to take away ownership rights, fair labor/pay, and commitment to citizens/employees the younger generations have made the corollary decision - no commitment to copyright and licensing laws or the country itself. I see this happening.
Worthlessly simplistic analysis at your site Reggie. I've often defended you against nonspecific and unwarranted criticism, but this is just ridiculous.
Cut losses short. Let winners run.
That said, BTFD is a strategy that's worked extremely well in recent times. But do it with an index, not an individual stock that has every kind of fundamental reason to be falling off.
You guys are ridiculous. Cut losses short!!!??? Google's up from high $400s to high $700s and fell about 11%. So you're sayong cut the ~60-80% gain and consider it a loss?
Simplistic analysis? I don't think there's a simplistic analysis in the 1,800 or so articles and downloads on the site. You guys must be board.
To Banzaii, thanks. Daughter still has fever and I'm sure she's given it to me...
Yes, Reggie. Cut losses short. Most experienced traders cut after a drop of 10% as a rule of thumb, even if there is no readily apparent reason for the drop, which is certainly not the case with GOOG.
"So you're sayong cut the ~60-80% gain and consider it a loss?"
Did I say that? No. I'm saying take the 60% gain and call it a day, or if you bought at 750 as you recommended not long ago, take the 11% loss and regroup.
Reggie, simplistic analysis is practically your calling card. Just sayin'
I'm not one to go all grammar nazi, but it might help your credibility just a tad if you'd learn to spell common words (sayong, board). Just tryin' to help. Wise to avoid emotionally driven writing too;)
My Google analysis was released in 2010 and I don't give public recommendations, so your assertion that I recommended a $750 buy is ridiculous. What drives people like you to say susch things?
My credibility is helped best by my track record, review it and get back to me: http://boombustblog.com/reggie-in-the-news and http://boombustblog.com/reggie-in-the-news/item/3571
Mayhap you should rank results higher than spell check on a free blog, eh?
Reggie, you could put up a blog where you show your model portfolio, then state how it's allocated, then as you make recommendations, update it with the price at open and it's weight in the portfolio, and likewise for the closes. Keep a running tally. Which begs another question, "Why haven't you done this already?" I've spoken of my fx blog at blogspot here a number of times (and posted some fx trades I made, in real-time, on this site, including opens and closes -- all winners.) On that blog (deleted by GOOGLE for no apparent reason, and they wouldn't give me an explanation!) I kept such a running tally of my trades for over a year. Almost 300 trades, including the open and close prices and the relative weighting. I did almost nothing to promote that blog. By the time GOOGLE destroyed it, it was getting 20,000 hits a day and I was earning about $6000 a month from AdSense. THAT'S how you establish credibility. If I had simply filled up a page with anecdotes about how I called the collapse of the real estate bubble and other such calls you consider "proof of a track record", I'd have never made jack off that blog.
My lawsuit against Google is still in its early stages. Heh.
I didn't get your recommendation on a public site Reggie. I used to subscribe. That's what "drove me to say such a thing." Presumptuous much?
Regarding your links...Reggie those are just anecdotal stories about how you called such and such event right...it is not an all-inclusive list of all your calls/trades, at what prices, when, and the realized results (or if unrealized, where they stand now.) It proves nothing.
You have been right about a lot of things as have many others. But what did you recommend, when, at what price, and most importantly, WHEN AND AT WHAT PRICE THE SELL?
Finally, note that I referred to your credibility here. It's clearly quite low, and lower than any other contributor here. Just a statement of fact.
While most everyone on this blog junks you constantly...often with few if any specifics...well, I never have unless today counts as "junking" you. I have defended you against non-specific criticisms on a few occasions. If your M.O. is to get upset with those who actually take the time to offer criticism in a constructive manner...perhaps that has something to do with all the junking you get around here.
And if you think that your grammar has no bearing on your credibility and you choose to just gloss it with "it's just a free blog" so it makes no difference, you're living in a dream world. Just click your heels together repeatedly and tell yourself it doesn't matter. Good luck with that.
So if you used to subscribe then you know there was never a $750 buy reco. You would also know that I don't give buy or sell signals because I don't offer a trading service, I offer fundamental research. You are coming close to slinging mud here. I have no problem with you disagreeing with me, but I insist you stay honest and stick to the facts.
My record on fundamental valuation is impressive, I'm proud of it because I work hard at it.
Yeah but have you said anything other than, "On a long enough timeline, every persistent speculator or borrower is bankrupt." (my version of the ZH byline)
I would like a concrete proof of one case to the contrary (net worth adjusted downwards by non-liar inflation of course).
Here is my brief history of Google: they hit the big number on search, partially due to their brilliance but also due to the stupidity of everyone else in the search game. By the time the morons realized what Google did, it was too late to reach the necessary matching scale.
They milked that baby for all it was worth and ran the company like a giant playground for PhDs and engineers, money was burned on all kinds of pet projects and toys.
Schmidt, who was on Job's board realized what Jobs was doing and the fear of financial God suddenly returned. Jobs was cagey, but he had a very definite strategy at that point. He was going to surf the next big wave, mobile.
That is when they started the catch-up copy cat game with Android. But you may recall that they started by saying they also wanted to be a carrier. That is what they were saying when Jobs unveiled the iPhone, which no one believed would take off like it did. Sound familiar?
Android is first and foremost a lower margin alternative to the iOS product stable. So while there are lots of Android devices flying around, it is not the same mobile profit driver to Google that Jobs envisioned and executed for Apple.
Google grossly under estimated the cost and resource drain of restructuring Motorola. I don't believe the simplistic Motorola patent narrative. They are engineers not lawyers and engineers love to make things like their own phones, not litigate. That is really what drove the acquisition psychologically, notwithstanding the need for an IP defense strategy.
Now the mobile paradigm is really starting to bite Google and Facebooks PC oriented business models. Competition in targeted social advertising is going to increase in intensity hurting Googles scatter gun Adsense/word cash cow and Apple is not even in that space.
Putting aside Apples product ecosystem, what Apple has that neither Google nor Facebook have, is a loyal following of customers who are well attended to and, more significantly, their credit card details.
What Apple does not have is a driverless automobile department or a giant acquisition distracting management.
This game will only get more interesting.
Good comments...timing can be everything too and just to note that it tookalmost a year from Google's takeover announcement of Moto until they got all the OKs - the last one, I think, was from China and took the longest.
I think the buyout announcement was 15 Aug 2011 and China's OK came 20 May 2012 - OK nine months.
Nice summary, William. You have forgotten more about computers than I will ever know. I would just add, that from a business perspective, Google's search engine sucks. I occasionally need a quick update on tax, trust, or farming data, and all I can get from Google is what twat showed her ass on the boob tube last night. I'm sure that drives clicks, but may not work for long term revenue.
I am familiar with Google because I follow them not as a stock but as a technology provider.
I used many of their online applications. I still use Gmail. But frankly, the the other stuff was never with it. Google Docs is terrible. Picasa, which is an image host is terrible. I use blogger only because I dont have the time to redo a blog site. If I did, I would do it on wordpress.
There was one thing they had which I loved but they discontinued. It was a browser based research tool for cutting, clipping, annotating and notebooking research done on the web. Much more practical and useful for research than book marking.
The Google is evil meme is something that crept up later.
I still use an iPhone I, but I surf and read with two iPads. All my image processing is done on a big screen Power Book circa 2008. They gave me a new video board for free 2 years ago so the thing still runs beautifully.
I will say that my image works would be much better in detailng if I upgraded my devices because the screen resolution on the new stuff is unbelievably good. I know this because I have occasion to view them on other people's devices and I am not always happy with the way things look.
I was a PC man for many years before I got fed up. I had my first website up in 1997. That's a different story. ;-)
However, I am a gadget freak and I am not an Apple cultist. I have done quite a few satires on things Apple. I currently think it is very funny that they are now slimming down the iPad but bulking up the iPhone. But I understand why they are doing it...good ol' competition.
Reggie, if you are reading this, my humble advice is don't bother aggravating yourself.
Take care of your daughter.
William:
talented AND a gentleman. how rare. how rare.
Civility is almost the only thing that separates us from the animal species, that and cartoons ;-)
Banzai, we are no more civil than nature, in fact we're far less (see wars for no good reason, can you find a war with good reason?).
Amongst 'civil' humanity some are even paid to be biased shills, you just don't get that amongst the animal kingdom
you want civilty, shoot all politicians (and paid shills) on sight
Let me put it differently, I try to keep things in perspective, as difficult as it is in this day and age.
I keep my perspective by a daily watch of nature outside my window... and I feed a flock of about 8-9 white pigeons on my veranda
I guess they're all white because we live amongst white buildings, this improves their chances as they blend in (camoflouge) in this area with few grey ones
when you feed them if the bread's in a small area they all jostle for the food (compete for a resource). Once their bellies are full their personalities change, they calm down and move onto less important matters like preening and posturing (for a nearby mate)
this is human behaviour in a nutshell for we are but chps off the exact same genetic block
Philosophy can go hang, it's bollocks. You'll learn more perspective from a pigeon than any academic in history
Reggies rational thinking also appears to be hanging by a thread. His Apple-hater Series proves rational thinkers are window dressing for one spin or another
Good stuff Banzai. I don't know why ZH and RM have such a hard on for Apple. It's a little creepy.
It has lots to do with Bernanke, APPL's market cap and hedge fund laziness. When I first thought of APPL as a stock pick, it never occurred to me that it would get pumped full of QE like it has. Sort of like nitro injecting an racing engine.
gmail sucks now after they changed it, chrome is a POS that fucks up your settings after you remove it. they're "improvements" blow! toolbar has to be reinstalled if you click the x on the left on accident. Simple things that annoy the hell out of me. Across the board they are fucking up.
Reggie's going to have to receive larger checks from the CIA if he's going to be able to keep his business alive after historic losses. Heck he might not even be able to keep his supply of tarzan outfits as they may be repossessed. As for the operation to remove the marbles from his mouth to relieve his speech impediment - it has been cancelled.
Keep up with your disinformation campaign Mr. NSA, we love to witness propaganda in action...
Goebbels
Has been a while. Let me just note that Google is controlled by its co-founders. While, Apple & the rest are mostly controlled by CEO's (diluted shareholders are as passive as your average voters in a developed 'democratic' country. ) with often short term goals. So which team would you bet on in the next twenty years? Someone who has a vision and wants their baby to prosper or someone who envisions early and fun retirement and related packages ?
The above aside, fundamentals while totally irrelevant today, historically always bite back with the vengeance.
Be well yo'll.