Success can be fatal in technology. That's because success
leads to growth, and that frequently stifles the original
creativity and innovative spirit that made the company great in
the first place.
That predictable cycle has been on display once again in the
past few years, with industry leaders
Microsoft (Nasdaq: MSFT)
Intel (Nasdaq: INTC)
failing tocapitalize fully on growth in mobile markets. In the
dynamic technology sector, the biggest and most successful
companies sometimes struggle to stay current with the latest
trends, much less lead themarket with groundbreaking technology
But one well-known technology giant is breaking the mold.
Few companies have ever experienced such a meteoric rise,
withshares up 750% aftergoing public less than 10 years ago,
making it one of the most valuable in the world.
But unlike many other mega-cap market leaders content to let
growth stifle innovation, this company continues to produce
market-leading technology inmultiple high-growth markets.
Google (Nasdaq: GOOG)
is already one of the most valuable and powerful companies in the
world. Since going public in the fall of 2003, shares are up more
than 750%, giving the company an eye-poppingmarket cap of $293
Google's charge higher has been driven by its dominance in the
search market, where the company is the undisputed global leader
and accounts for close to 75% of totalrevenue . According to
market research firm ComScore, Google captured 66% of the
domestic search market in April 2013. Google's dominance is even
more pronounced in Europe, withmarket share over 90% in the U.K.,
France, Germany and Spain. Google is also the market leader in
Canada, Latin America and most Asia/Pacific countries.
But instead of resting on its dominance in search, Google is
leveraging its incredible intellectual and financial resources to
pursuit opportunities in high-growth markets.
Nowhere is that more apparent than in Google's bold move into
the mobile market. The company's Android operating system is the
No. 1 mobile operating system in the U.S. with 50% market share.
Google'sacquisition of Motorola Mobility in 2010 was a bold play
on the hardware and devices side of mobile to create
additionalsynergy with Android. Providing operating systems for
mobile devices provides Google with incredible power and
flexibility to expand its search business through mobile and
share its deep portfolio of products and services.
Google is also looking tocash in on the fast growing
wearable's market with its Google Glass product. According to
Juniper Research, 70 million connected wearable gadgetswill be
sold in 2017, up from just 15 million thisyear . Google Glass is
a bold play to cash in on that trend, entering the market as an
early player and providing the industry with recognition and
credibility. Google is expected to sell 124,000 Google Glasses
this year, but the growth potential is huge.
||The company is looking to cash in on the growing
wearable's market with its Google Glass product. Google
expects to sell 124,000 units this year.
Google is also making an aggressive move into broadband data
services. The company is in the process of building a superfast
1-gigabit-per-second broadband network called Google Fiber. The
broadband network has already been rolled out in a few select
cities with excellent results, but longterm , Goldman Sachs is
predicting that Google could reach as many as 8 million homes in
nine years, which would make it one of the largest broadband
providers in the country.
Google is also pioneering the charge in driverless technology.
This may sound like science fiction, but Google estimates that
its self-driving cars can eliminate 90% of accidents per
year,saving more than 30,000 lives and $400 billion in
accident-related expenses. Although Google's driverless car is
years away from potential commercialization, it's another example
of how the company is developing game-changing technologies in
huge growth markets.
But Google's portfolio of products and services doesn't end
there: The company also owns a proprietary Web browser in Chrome,
the second-largest search engine in the world in YouTube,
document-sharing programs with Google Docs and online payment
systems with Google Wallet.
Google will also have plenty ofsupport from its powerhouse
financial profile, with cash and equivalents of $50 billion and
just $3 billion inlong-term debt . That gives Google plenty of
flexibility to invest in research and development and buy smaller
As you can see, Google is a diversified technology company
that offers targeted exposure to some of the mostbullish trends
in the industry. That hasanalysts expecting big things for a
company of Google's size: expectedearnings growth of 13% in 2013
and 16% in 2014. In the next five years, analysts are projecting
annual earnings growth of 16%.
Risks to Consider:
Google is making biginvestments in high-risk projects like
Google Glass, Google Fiber and the driverless car. Those new
products and services require bigcapital investments before being
able to evaluate profitability in commercialization.
Action to Take -->
Google is the rare mega-cap in technology that continues to
produce groundbreaking innovations in high-growth markets. But in
spite of the company's impressive product portfolio and dominance
in multiple segments of technology, Google's forwardP/E
(price-to-earnings) ratio of 23 times is in line with its peer
average of 22.5 times.