If atoms are smartphones and electrons are digital web space, all and sundry must be aware that selling atoms, which are physical entities are far tougher than selling electrons! Lately, Larry Page the CEO of Google Inc (NASDAQ:GOOG) realised this difference.
Why are analyst so optimistic about GOOG?
The Motorola Debacle
Page was eager on emulating the Apple Inc. (NASDAQ:AAPL) model of hardware based business. Page’s GOOG purchased Motorola at a whopping $12.5 billion. The company which has deep roots in the software based or web based regime, found it tough to carry out business in the smartphone space profitably. Consequently, GOOG sold Motorola to the Lenovo Group for a meagre $2.91 billion.
Difference In Revenues
If one sees the differences in the net revenues garnered by the two companies, it is perceivable that AAPL’s quarterly revenues were $75 billion lately, which is $9 billion more than the net yearly revenues garnered by GOOG that estimated to $66 billion. Indeed, selling atoms as computers or smartphones are far more profitable and lucrative business than selling electrons like online adverts and web services.
No Scope For Emulation
Google found out that it was not pretty easy ‘being Apple’! On introspection, it is realized that GOOG’s Motorola deal did not make much sense. Investment philosophies differ as per likes, nature of business and business gamut or mind set.
Back In Time
Remember the AOL/Time Warner merger worth $164 billion that took place in 2000? Eventually, this emerged the worst ever merger in the history of the US. There was a humongous mismatch in overall investment philosophies among the stakeholders in general. This scuttled the emergent deal and triggered a selloff in the technology stocks.
Google Inc (NASDAQ:GOOG) made a similar error by emulating AAPL type business model. They failed miserably, biting the dust! Larry Page understood that the deal was a bad one; the company learnt that emulating a business which has principles and investment philosophies that are polar opposites, is a mistake.