Google: The God is Not Immune to Worldly Matters

Google's (GOOG: Quote & Chart) first-quarter earnings report is due out on this Thursday. And many would try to find the answer to the question: Is this high-flying company faltering in the face of a recession?

2007 had been a great year for Google. The year brought a lot of cheer to those analysts who followed the company and, after each crossing of a century mark, issued another price upgrade by another $100 and were proved to be correct! Their attitudes smacked somewhat of the 'irrational exuberance' prevalent in the year 1999-2000 when all technology analysts were taking great joyrides on the back of some immature (and may be innocent but greedy) investors.

To these analysts Google was such a formidable God that the act of worshipping this God made them forget about other dangers of the world that this God, if properly asked about, could only show as results of its search engine but couldn't really control and thus indeed was vulnerable!

For example, on January 9th, Hillary Kramer, the stock-picker guest of the Nightly Business Report picked Google to be her choice of investment at that day's closing price of $653 (down from its 52-week high of $747 reached on November 7th), adding that she was hopeful the stock would soon surpass $800! And last Friday's closing price was $457.45! In the meantime it also passed through the 52-week low of $412 on March 17th.

Google is a great company. As far as search engine is concerned, Google still rules the world and our mind. But, as an investor, we need to shake off our emotion and stand aside and have a closer look and ask some questions: How many new products that the company launched have gone on to generate significant revenue? How many companies that Google bought (with rather high price tags) are going to significantly contribute to its coffer in near future? Can the company make money from ads while consumers continue to suffer from high prices of food and fuel and thus hesitate to spend?

The answers to these questions (if you try to search using Google) do not look rosy, if not gloomy. While nobody can doubt the long term prospect of the company, it seems lot of dust needs to be settled before the company can boldly cross the $500 mark again and this state of uncertainly should continue for quite some time irrespective of the outcome of Thursday's earning report.