Here's the anomaly. Consider the following three-month trading chart:
You'd never think it but here are the facts:
- Google stock has been experiencing a number of non-disclosed acquisitions.
- Sun has had investors exiting to the tune of eight figures on a market cap of ten.
- Microsoft meanwhile, sits more comfortable than both at a price/earnings way below the industry average and with a product - Windows Vista - which everyone is talking about coming out later this year.
These kinds of anomalies are typical in the behaviour of companies where acquisitions have been strategically arranged and are still in the 'preparation' phase. Google has to do as much of a job in showing benefits of acquiring Sun as it does in proving its own capability to turn things around there - and what better way to do it than show the growth potential of the company it is preparing to acquire?
Anyone who thinks Google can continue its phenomenal growth without a platform to combine hardware, storage, StarOffice, JAVA, and Solaris ought to think again - the combinations are the only competitive advantage that can enable them to trade at a P/E of 100 - and perhaps way above. Indeed, this was exactly what happened in 2000: too many technology companies relied purely on supposed revenues derived from 'wandering customers', rather than delivering the hard substance that drove the bottom line exterior to trends of marketing and advertising. Sun's growth potential is what Google may well be looking to acquire - and that is largely stored in intellectual property, where Google hold their key competitive advantage: translating exactly this kind of property into cold cash.
My guess is that top brass at Google having been laying the groundwork for the cultural integration of the two companies without much concern for the price, which has probably already been hashed out.
As soon as Page and Brin steal this company, they'll have a business model set in place that the market can't argue with. Neither myself nor anyone I know owns any shares in Sun or Google, nor do I intend to buy any â€“ Iâ€™m into analysis rather than speculation - but as for latter, Iâ€™d rate it a STRONG BUY right now.