Shares of Google shoot above $600

The Baltimore Sun

SAN JOSE, Calif. -- Google Inc. continued minting buckets of money for its stockholders yesterday, finishing above $600 a share for the first time on optimism over its continued dominance of online advertising.

The company ended the day at $609.62, up $15.57 or 2.62 percent, rebounding sharply from a month ago, when a tepid second-quarter earnings report sent its share price to around $500.

Since then, the Internet search company's market value has grown by $29.7 billion.

Google's shares are now worth $190 billion. That compares to Intel Corp.'s nearly $150 billion, Apple Inc.'s $146 billion and Oracle Corp.'s $115 billion.

But Intel and Apple went public more than two decades ago and Oracle 19 years ago, while Google's stunning rise to riches began with an initial public offering at $85 a share a little more than three years ago. Its shares have increased 617 percent since then.

Others grew faster

While that has minted billionaires and millionaires faster than Ferrari can make cars for them to buy, it pales next to the performance of several Internet stocks during the same amount of time. Yahoo Inc. rose 6,730 percent, Cisco Systems Inc. rose 1,872 percent and eBay Inc. 1,971 percent.

Google went public Aug. 19, 2004 - yet another company started by a couple of Stanford students with a novel idea. The two students, Larry Page and Sergey Brin, are now each worth $20 billion, and some of its top executives are billionaires in their own right, while hundreds of employees are millionaires.

Already the leader in Internet search, Google has seen its stock benefit from the addition of new products that draw increasing numbers of advertisers away from traditional media such as print, television and radio.

You can send e-mail, run spreadsheets, do word processing, get directions, and show off on YouTube without ever leaving Google's growing embrace of the Internet.

The firm also is reportedly finishing work on a platform for mobile phones that includes Web browsing. But the company's bread and butter is still online advertising, which it continues to dominate.

A report Friday on a big increase by advertisers in U.S. online spending may have helped propel yesterday's Google surge. Online advertisers spent $5.1 billion in the second quarter, up 25 percent from a year earlier, according to the Interactive Advertising Bureau and PricewaterhouseCoopers.

And search ads, Google's main revenue source, accounted for 41 percent of all online ad spending in the first half of the year, the study found, while ad spending on network television, radio and newspapers fell.

Now Google is counting on a planned $3.1 billion acquisition of the advertising distribution firm DoubleClick Inc. to add to the types of ads it can offer customers. The deal would give Google a major opening into Internet display advertising.

It took Google 11 months to go from $500 to $600 a share, but there is no consensus on whether, or how soon, it will reach $700 per share.

(The unusually high share price is explained by the fact that the company does not split its stock, unlike almost every other public company.)

Bear Stearns Cos. is betting it will, while other analysts think Google will remain in the $600 range for some time to come.

High PE ratio

By some measures the company's shares are already very expensive, with a price-to- earnings ratio of 53.8, compared with 47.4 for Apple, 19.9 for Microsoft Corp. - and 9.7 for General Motors Corp. PE ratios measure how many dollars investors are willing to pay for each dollar of a company's earnings; the higher the ratio, the more expensive a stock is considered.

At what point does this run out of steam?

It faces competition from Yahoo and Microsoft, but it appears increasingly difficult for a newcomer to chip substantially at Google's dominant position.

Investors will get a better chance to gauge how well Google's doing next week, when it releases its quarterly earnings.

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