Perceiving Potential

Is Google stock ripe for a spectacular pop? Hovering shy of $700 and with a market cap approaching one quarter trillion dollars one would think that Google is a venerable multi-national company with leading brands throughout numerous market segments. Google’s market cap has eclipsed industry heavyweights like IBM, Oracle, HP and Cisco let alone niche players like Dell, Symantec, SAP and Apple.
I don’t mean to diminish the astounding success of Google. It has managed to utterly dominate the online search segment, amassed goodwill among the general population and provide revenue and profits that are nothing short of impressive. Bu why is Google worth so much? My guess is that Google has managed to capture the mindshare of the general population in an almost mystical way. It is this unique intellectual capital that has propelled investors and laymen alike to perceive an unlimited potential in whatever it does. Maybe investors are hoping that the uncountable, semi-ready, products and services that the genius minds at the Googleplex have throw out on the web will somehow create an avalanche of revenue. Google can create anything and do anything.
Toyota can only make cars.
We could be only a financial quarter away from “Google _____ Beta” being the next cash cow. We may all be using Google phones, Google spreadsheets or even Google spaceships. Or if one takes a more ideological train of thought, Google may be the company that will transform the technology industry into one where open source software or software as a service (cloud computing), which Google is a strong supporter of, will replace the traditional software model.
Google: even the etymology suggests unlimited potential.
On the other hand, when one reflects for a moment and ask this hypothetical question: what would happen to the average Joe if Google ceased to exist? What if Google disappeared for a week or even forever? Well, a lot of people would have to use Live Search or Yahoo maps to search for restaurants and print maps, not to mention check their email at another service provider.
How about the logical follow up to that questions: What if all the products and services that IBM, Microsoft, Cisco or Oracle disappeared for a week? Nothing short of the end of the modern economy.
As the economy slows, and the possibility of a US recession nears and advertising dollars dry up, Google’s value may very well come back down to reality. If it does, the it likely will get down to a range where Google’s more traditional competition lies, in the 50 billion range along side with Yahoo!, a darling of the previous bubble.