S&P Downgrades Google Stock Rating To “Sell”

[onehandle]

Source: Mashable/Wall Street Journal

Equity analysts at Standard & Poor’s downgraded Google’s stock rating from “buy” to “sell” Tuesday, following the search giant’s decision to acquire Motorola Mobility for $12.5 billion.

In a statement on the rating reversal, S&P equity analyst Scott Kessler said that the Motorola purchase puts Google at risk. S&P does not believe Motorola’s patent portfolio will ease Google’s patent woes.

Google shares closed at $539 Tuesday, dropping 3.3%.

“After further consideration of GOOG’s plans announced yesterday to purchase Motorola Mobility (MMI 38, Hold), we see greater risk to the company and stock. We expect the transaction to be consummated next year, but later than early ’12, which GOOG indicated. Moreover, despite MMI’s extensive and valuable patent portfolio, we are not sure it will protect Android from IP issues. We also believe the purchase of MMI would negatively impact GOOG’s growth, margins and balance sheet. Based on revised DCF analysis, we are cutting our 12-month target price to $500 from $700,” Kessler said of S&P’s decision to downgrade the stock rating.

Read more: http://mashable.com/2011/08/16/sp-google-sell

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S&P got this one right. Analysts have calculated what it's going to take Google to pay off this massive overpayment for a failing company and it ain't pretty. The purchase is nearly two years of Google's profits.

[neoconn]

1. Don't be to sure about that..

I happen to think they will prosper....

[HuckleB]

2. The bigger question is why do investor's trust S&P at all?

:shrug:

[saras]

3. Indeed. Most everyone I read who understands either Google or Motorola thinks it's a good move

The move makes me question S & P, not Google.

I think the negative predictions are based on the probably false idea that Google has no more of an idea what to do with new technology than the average company.

[cstanleytech]

4. I assume because they (S&P) has a history of getting a forecast right than they do

of getting it wrong? Thats just a guess on my part of course.

[HuckleB]

5. That's the problem.

It doesn't seem like they've done that.

[cstanleytech]

7. Do you mean thats your opinion on S&Ps

opinion on this purchase by google or is that your opinion on S&Ps history of forecasting stuff?

[dipsydoodle]

8. Probably right

They otherwise wouldn't have credibility.

[indurancevile]

10. +1

[AlabamaLibrul]

6. Well the way S&P's been going lately....

That means GOOG will jump 8% like how T-bonds rallied hard after the downgrade.

The only person who'll end up poor out of all of this is someone who takes their advice.

[hamerfan]

9. Seems to me like

Motorola has been a rudderless ship for quite a while now. I have no idea if this is a good move or not, but I generally don't trust mergers.
hamerfan

[fujiyama]

11. I haven't looked into the details of this deal yet

but from what I've read, Android by itself isn't doing much of anything for Google's bottom line even though it's used by a signficant % of the smart phone market. By a twist of fate, I think I remember something about Microsoft profiting off it due to licensing (I'm not very familiar with the situation. Correct me if I'm wrong)...

Besides, Apple is expanding even more aggressively with the iPhone, with lower end models and pricing plans being rumored. As it is, the exclusive ATT contract is over and I've heard plans for a Sprint model as well.

This aquisition may be the real way for Google to really make more headway in this area. It'll be interesting to see what Android's future on HTC and Samsung phones will be, as well as other Motorola's rivals.