Is it because I have fallen in love with Google?
Maybe. But I am also trying to understand Google’s dramatic decline so far in 2010. Sure, Google lost a major battle in China and is almost out of the market. But it’s not like this market had made a major contribution to the company’s revenues and profits. And Google does have a lot of support among the US government, so even that story could end up turning around. But even if it doesn’t, Google remains a company that has so much more potential than AOL in my opinion. It is behind what could arguably be the best operating system for mobile phones (and some say the fastest growing), has just started a global alliance with Sony to launch Google TV, is the king of online video thanks to Youtube. There is one missing piece right now, and that is social web of course. But a company with the financial resources of Google has many ways of solving the problem. Right now, the solution seems to be pushing hard on Buzz. But it could at any point try to get a deal done with Twitter (Facebook does not look for sale right now).
AOL on the other hand is an internet company that I have been bashing on for a while. I did have some more positive words for Yahoo in this week’s edition of IntelligentSpeculator Premium (although I remain short) but AOL continues to look doomed in my opinion. I would compare AOL to those old airlines like United Airlines & Northwest in the airline industry. They can always try to reinvent themselves but if the overall structure of the company is old and non-competitive, they will never catch up to newer and better competitors.
Could anyone argue me about the fact that Google is a much more dynamic company than AOL? Seriously? Even numbers don’t lie. Revenues for Google are up 8.51% over the last year. Not anywhere near what is needed. But compare that to a 21.81% decline for AOL. One of the main criticisms made towards Google is how dependent it is on Online Advertising. That is true but it is even more so for AOL which is So how can the P/E ratio be as follows:?
Ticker Name Price PE Ratio PE Next Year Return YTD Sales Growth Analyst rating Book Value Beta Revenue/Share Sales 5Y Avg Growth EPS 5Y Avg Growth
MSFT Microsoft Corp 54.35 22.66 17.78 -1.35 7.77 4 9.69 1.22 11.44 3.91 -3.99
EXPE Expedia Inc 114.3 52.63 17.1 -7.83 15.77 4.14 32.37 1.16 51.26 18.34 N/A
That is such a small difference for two companies that are a few worlds away from each other. Google has a lot not going well but many different things could turn around. As for AOL, the main thing that could take off is the Local Patch network. But that is not a revolutionary idea and it will face stiff competition from Google, Yahoo and others in the local web.