The Month that was Espana's

The World Cup in South Africa has now come and gone with the Spanish armada being crowned World Cup Champions. After a month long spectacle that saw Europe descend and then resurrect into the new football--um soccer, power the Oranje of the Dutch can only reminisce at what could of been after a hard fought, often literally, 1-0 World Cup Final Match.

Sports it seems has taken center stage of late, to the delight of BP (BP) which has seen it's stock drop 40% in the last three months as the Oil Spill, caused by the explosion of the Deepwater Horizon rig in the Gulf of Mexico continues to rage on. A $20 Billion expense net already set up by the company for damages and clean up, is a big chuck of change, even to big oil! But the biggest news coming to the state of Florida may not be the drifting oil slick but LeBron James.

The biggest name in Basketball decided to take his talents from Cleveland to Miami to play for the Heat franchise with fellow free-agents Chris Bosh and Dwyane Wade. A move that makes Miami the center of the basketball universe and puts the triumvirate within earshot of a sports dynasty.

But this time of year isn't just for Soccer tournaments and sports free agency, with the June quarter ending, earnings announcements will be gearing into full swing, especially in the technology space, with some of the biggest names like Google (GOOG), Microsoft (MSFT), Intel (INTC) and Apple (AAPL) expected this week and next.

With the economy and employment picture still at the forefront of a shaky market, there's a lot of questions about where the earning's growth will come from. Microsoft and Intel are set to benefit from a upgrade cycle of computers and software in the corporate space, especially the software giant from Seattle as it bangs the Windows 7 drum, to distance further and further from the previous and ultimately drastic under-achiever that was Windows Vista. Where as Google and Apple are capturing the mind-space of the consumer with highly successful smart-phone platforms Android and iOS respectively.

Apple's iPhone 4 launch was the most successful yet, selling 1.7 Million units in the first 3 days and adding to that 3 Million iPad tablets sold, in just under 3 months, and Apple investors continue to move towards higher and higher expectations. While Google's Android software is being pushed hard by phone carriers around the world, Google by giving its software away for free isn't exactly lining its pockets. What the company is banking on, is the ubiquitous nature of its search brand and mobile applications. An Android world means Google at the front and center of that many more mobile screens and quests for information.

The start of this summer and past the holiday weekends in North America have been dominated by the Sports pages, but now as the stadium lights dim on South Africa and the LeBron nuptials are signed, the focus shifts back to the markets and a slew of earnings releases and conference call transcripts to pour over and discover the next investment opportunity.

Disclosure: Author owns AAPL, GOOG

Money for Nothing (I want my Google TV)

No, the Internet Giant is not changing the vibe of the Dire Straits rock classic, but it is intent on being a new force in Television. At Google's (GOOG) I/O Conference today, the company announced its foray into the small screen world with Google TV. An eco-system of Internet enabled Television and Set-top boxes running the Android operating system and Chrome web browser.

Now, unlike previous Google announcements or releases, which many times reduce themselves to the happy-go-lucky whims and musings of the techie elite, i.e. lack any foundations in the business realm, this one is different.

With Android taking a strong position in the smartphone race, adding handsets and carriers every calendar quarter, and Chrome becoming the fastest growing browser on the Internet today, Google's in a position to bring partners on board with compelling offerings. Add to that, Google's ability to target advertising, and its willingness to share the honey pot, it's no wonder some big names jumped into Google TV. Sharing the stage with Google today were Sony (SNE), Intel (INTC), Adobe (ADBE), Logitech (LOGI), Dish Network (DISH) & Best Buy (BBY).

What Google TV is trying to be, is a solution to a problem that has plagued the Television world since the invention of the TV Guide. Program interfaces are and have always been atrocious, to a point where some cable system guides are almost unusable. When guides were only in print, hard to ask for much from a little magazine, but in the digital age to still be having this software problem is a black eye for the technology staples that make up the Cable & Satellite Industry.

Cell Phone interfaces had much the same problem, because there never was a need to innovate, and customers just accepted that using a phone was awful. It took Apple's (AAPL) iPhone to showcase what couple be possible when something is designed with the user in mind. And from that Phoenix, have risen many clones and competitors, the best of which arguably is Google's Android. By porting Android into Integrated Televisions from Sony and set top boxes from Dish and Logitech, all running on Intel's Atom line of processors, the goal is to move TV forward for the new Internet & Application age of today. Apple's iTunes-linking set top product AppleTV has been largely overshadowed at the company by the innovation and successes within the iPhone and iPad businesses, which has opened up a first-mover advantage and opportunity here for Google.

With Android being the platform for Google TV, the App Marketplace is also available and its library of 50,000 applications. Granted going from tiny cell screen to HDTV will likely require a majority of those apps to be re-written, but that base of developers is a key for the platform to gain traction, it'll also help if Sony sells a boat load of TVs.

A few key tidbits of the Google TV system include:
-> Ability to search across television guides and the Internet for television shows and films. This includes PVR functionality for future programming.

-> Ability to have television and the web in picture in picture mode, allowing Sports fans to look up box scores as the game is in progress.

-> Inclusion of popular social networking applications like Twitter or Facebook streams for currently watched programming.

-> Android devices can be used as remote controls.

-> On the fly Closed Caption Translation using Google's Translate engines.

Gizmodo has had coverage of the entire presentation here. (Link)

All in all an announcement is plenty of potential, a reasonable time line to market and a step in the right direction for the future of Television technology. Oh, and for Google investors, an advertising opportunity in that tiny sliver of the market, Television.

Disclosure: Author is long GOOG, AAPL

Google beats, but drops after-hours.

Mighty Internet and search Titan Google (GOOG) posted quarterly earnings for Q1 2010 and the stock was met with a 3% sell off in after hours trading. Google has been moving higher with the Technology Sector throughout the last week, moving 5% higher in 5 trading sessions to close today at $595/share. With options traders glaring at tomorrow's expiry date, Google's typically high expectations during earnings, and its typically low-brow approach to reporting them, lead traders to some volatile and erratic activity.

So what was in store for Google's Q1? The US is starting to create jobs again, the economy is back growing, and even retail numbers have been looking good, smells like recovery to this writer, and most recently, even to Jim Cramer! Google was expected to earn $6.56/share on a Non-GAAP basis, which would've represented a 27% growth rate on a year over year basis ($5.16 in Q1 2009). As for total numbers, Revenue expectations were for $4.93 Billion and Income went for $2.7Billion according to analysts on the street.

Google's Non-GAAP earnings came in at $6.76/share, $0.20 higher than expectations, representing 31% growth year over year. Revenue and Income were marginally ahead as well at $5.06 Billion and $2.78 Billion. Representing estimate beats of 3% on EPS, 2.6% on Revenue and 3% on Income. Not exactly setting the barn on fire! Or is it that analysts are starting to get the steady climb of Google's one stop shop money printing business? It's a bit of both you see, Google has yet to find another product or service that generates enough meaningful Revenue and Income to truly surprise analysts now and with the background checking done by Wall Street at Search Engine Marketing firms and a wealth of advertisers things are proving easier to predict and a good barometer of quarterly performance.

In the past, estimates would creep up over the 60 days period to something reasonable and then Google would have a chance to show case its money making prowess, but this quarter estimates 60 days ago were already at $6.50 according to Yahoo Finance. Until Google hits another Revenue home run, and maybe YouTube will be it someday, Analysts wont have too hard a time charting the growth trajectory. Which is why Google's stock has been hit 3% on this modest earnings beat.

Investors should spend some time looking at the cash generation abilities of this company and its grand scale future plans, moreso than a quarterly statement. Generating $2.5 Billion in Cash Flow over the Christmas quarter, Google has followed that up by generating $2.3 Billion in Cash Flow for its Q1 of this year. The fact that this Advertising behemoth is on pace to generate $10 Billion in cash this year through simple text links (mostly) is a remarkable business study, and one the next generation of web properties are trying to get in on quickly (read: Facebook & Twitter). And with a cash horde of $27 Billion, Google has plenty in the bank for any sort of Thor type thunder that might near it--Marvel fans.

Google's forays into other businesses thus far have paid little fruit comparatively but the growth rate in Revenue tells an interesting story. Total Revenue has grown 30% in the last two years at Google, while the category of "Other", which includes Google Apps, Licensing and all the various side projects that aren't advertising have grown from $100 Million to $300 Million (a rate of 200%). It is this kind of growth trajectory that will get Analyst attention in the coming quarters if Google continues to push products and services in other genres than Search.

Google investors were fine before this quarter and they'll be just fine after it. Google is absolutely a company with long term vision, that is now settled in a mature (but rapidly evolving) multimedia advertising business. The ubiquitous nature of the Internet and its availability on phones, pads and all else under the sun, puts the Google brand front and center in people's lives. With that placement and clout, comes the assumption that the cloud is the future of computing, complete privacy is a long gone myth, advertising means the same as subsidy and the fact that the ad becomes a necessity for the convenience and convergence of a connected world. If that's believed, Google's one of the best future-proof investments to have.

Disclosure: Author owns GOOG.

New Orleans Saints are Superbowl Champs but what of the Commercials?

A football team embraced by a city as escapism; and for the excitement it provided the residents of New Orleans following the disastrous aftermath of Hurricane Katrina, has now come full circle to offer its hometown the celebration it deserves and desires. The New Orleans Saints defeated the Indianapolis Colts in Superbowl XLIV, the 44th such contest of football's conference champions, and sent the French Quarter and the surrounding and still rebuilding areas into a frenzy that's likely the continue well into Mardi Gras.

As much as the spectacle of the Superbowl is remembered for what happens on the field, it gets almost as much attention for what happens in between the action. Commercials, are always a hot ticket and with price tags in the $2.5Million to $3Million range for a spot this year it was up to corporations to deliver catchy, memorable and likable ads. A game that featured two of the league's top Quarterbacks was sure to be a windfall for CBS Corp. (CBS), and early ratings would suggest that's the case. A report this morning puts viewership of the game at a 23 year high. That's a lot of eyeballs watching the players on the field and all those commercials.

Alcohol always seems to go after the comedic bone with Anheuser-Busch InBev (BUD) and its legendary stable of Superbowl spots. The Clydesdale's, the Wassup guys, the Frogs and more have all pushed Budweiser Beer onto the masses for years with recent Bud Light ads becoming the "lighter" touch. This year's game featured the musical technique known as Auto-tune with several men crooning to each other over the phone after getting some Bud Light. The ad also featured Auto-tunes foremost proponent Mr. "I'm In Love With A Stripper" T-Pain, or as he's known amongst the younger hipster crowd, the dude on the [expletive] boat with Andy Samberg.

Motorola (MOT) went for comedy and sex appeal as it showed off its new Android powered smartphone the Devour. Using Google's (GOOG) Android operating system and its own MOTOBLUR interface, Motorola looks to continue the successful smartphone push it has enjoyed on Verizon (VZ) with the Droid. The ad featured a bubble bathing Megan Fox pondering what if any consequences would arise from her sending a photo of herself in the bath. Subsequently men all over the country are instantly distracted and much chaos ensues. The company has even put several out-takes from the ad on its website.

Staying with Google for a moment, the company for the first time has decided to advertise on this big a stage. The results, one part sappy, one part romantic, one part technology and all parts effective for portraying the message of Google being THE destination to find anything. The ad features the main Google search screen as a story unfolds of Boy meets French Girl, Boy searches for ways to impress French Girl, Boy Searches for flights to France, Boy searches for work in France, Boy searches for chapels in France, Boy searches for help building a crib.

Discount Brokerage and Superbowl mainstay E*Trade (ETFC) brought back its popular baby investors with a little twist, female companions and a new catch-phrase "milk-a-holic".

Taken together, the ads this year have according to early reviews been lacking the punch of previous incarnations, but sifting through the mass of advertisements, which are all featured on a special YouTube channel one can still find some that will undoubtedly be talked about over the water-cooler for the week to come.

Disclosure: Author owns GOOG, VZ

Google China to be no more?

Google's (GOOG) foray into China had never gone swimmingly, the "Don't Be Evil" chants turned to scoffs as the company told the world its better to have a censored presence in China than no presence at all. The pitchforks subsided and its been business as usual for the company as it slowly built a base of business, taking on the dominant local Baidu (BIDU).

Having now built a business, that according to analysts represents about 20-25% of the market, Google is becoming entrenched into China's business culture and livelihood. The Chinese Google portal succumbed to Government pressure in the beginning but as new reports have surfaced of cyber-attacks on the search giant, the company is taking a stand for the individual. Gmail accounts of human rights activists, the exact opposite of persona embraced by the Chinese Government, were targeted in a set of complex hacks. Google has taken this breach as an opportunity to exert maximum political pressure in China. By issuing threats that it will completely pull all operations in China, Google is looking to foster a groundswell of individual support to force the Chinese Government into change, most important of which is the curtailing of Internet censorship.

Will it work? History would say no, as China is looked upon as the most vigilant of Governments when it comes to control, censorship and human rights. Google's timing could help shift the needle, but by how much? With a presence now built in China, Google has more influence than it ever had in the region, and perhaps just maybe, a compromise does exist and can be reached.

But what if it can't and Google leaves China for good? Well, that's the worst case scenario for the company as the business opportunity in China is only getting bigger. Analyst reports have pegged Google's China sales at about $600Million, but have highlighted the incredible opportunity that awaits Western companies in this region over the next decade and beyond. Not something that Google could seriously walk away from just like that if it indeed is balancing the needs of Consumers, Shareholders, Employees and its Don't Be Evil mantra.

Right now Investors are trying to figure out the seriousness of Google's threat. Company shares are down about 1%, which is a muted move to a potentially landscape changing decision. Baidu shares on the other hand, are up 11% as the potential to dominate the Chinese search market, without a looming competitor like Google is just too large to ignore.

Something will have to give and at the end of the day the opportunity of capitalism is too great and the pressures from shareholders will force Google's hand to have a presence in China. In the interim, Google's step will be to ensure complete security in its online services to try and isolate and prevent these types of attacks, even if the source may be a Foreign Government, but the smart money has to assume Google and China will be back at the table constantly, working to compromise, making it possible for the Chinese people to see and click on Google Ads for the next decade and beyond.

Disclosure: Author is long GOOG

Research In Motion Regains Footing

Some difference 3 months can make. Research In Motion (RIMM) stock 3 months ago was bearing the brunt of sell-off at the behest of disappointing performance and guidance, dipping from the mid $80s to the high $60s per share. The stock had mostly held water of late, sliding slightly to the low $60s but was in a position to change all that with another earnings report.

With the increasing competition from Apple's (AAPL) iPhone, Palm's (PALM) Pre and heightened marketing given to several smart-phones running Google's (GOOG) Android software RIM had to deliver, on all fronts, and it has. Blowing past all expected metrics is leading shares of RIM higher by 11% early in after hours trade.

The lines: Revenue of $3.92Billion vs $3.78Billion estimated; Income of $1.10/share vs $1.04/share estimated; Subscribers at 4.4Million vs 4.1Million estimated. RIM also shipped 10.1Million units during the quarter, including a milestone generating 75Millionth.

Seems the analyst talk of RIM's mighty fall via the dual-pronged iPhone/Android sword will have to wait for the time being as the folks from Waterloo can pop the bubbly for at least another quarter as going into the Christmas season the guidance RIM provided was very strong. Revenue of $4.3Billion vs $4.11Billion and EPS of $1.27/share vs $1.12.

So, with RIM so firmly positioned, what's wrong with the company and why isn't it a must own in the growing smart-phone industry? Two main reasons: Interfacing and Extensibility.

In interface design RIM is not even close to the same league as Apple, let alone the various flavours of Android that are appearing in the market-place. The company has such a culture entrenched in the corporate world that functionality for the consumer has always seemed like an after-thought with the current incarnations of the BlackBerry OS. This was most evident in both versions of the touch screen device Storm that the company debuted to scolding and muted critical response.

In regards to extensibility its hard to call RIM's platform a leader in any sense of the world. Its BlackBerry App World platform is another after-thought and in the days of the highly successful iPhone/iPod Touch AppStore, being an afterthought is just about being dead in the water. While Android is still nowhere near Apple's 100,000 applications catalog, it is getting there with over 16,000 available for various handsets. In this race RIM is already well-behind.

But there is a silver lining, the company makes very good looking hardware, for the most part, and is a staple in the corporate world, which is a business that isn't going anywhere and will grow with the rise of smart-phones world wise. Prospects continue to look good, and if the engineers can get their software act together for a new version of the BlackBerry OS, it really can be a 3 pronged fight in the mobile space for the decade to come, and that kind of potential will have analysts and investors eager to jump on board.

Disclosure: Author does not hold any position in RIMM, is long AAPL, GOOG

Markets fading to start December. What's in store for Christmas?

The first week of December has been one dominated by the sordid affairs of Professional Golf's most notorious figure, and as the rumor mill churns to fill gossip websites and supermarket rags, critical economic, fiscal and international issues are bumped to Page 2. So let's take a look back at what's been making the rounds.

The President of the United States, Barack Obama, always seemingly juggling several critical agendas, has his work cut out for him as he steers the US Senate in the Health Care debate behind closed doors, outlines a plan to send 30,000 more troops to support the War in Afghanistan and holds a Jobs Summit to deal with unemployment. The administration hopes to deploy unused or paid back Financial Bailout Money to support small businesses in lending and hiring and to ignite country wide infrastructure and energy efficiency projects, and to top that all off, newest laid out plans call for the creation of the biggest government transparency project in the Nation's history.

Certainly an ambitious agenda that is sparking controversy from either side of the American political aisle, but as Health Care is being actively debated in the floor of the Senate a passage of a reform bill seems ultimately likely. As for jobs, a very positive report for November had the US losing only 11,000 jobs in that month, with further reductions in previous month loss estimates. A far cry from the over 700,000 per month that were lost in the early parts of the recession. Still, with unemployment sitting at 10% of Americans something more has to be announced and followed through by the Administration.

On the market's side, the recent rally in Gold finally hit a bit of a stumbling block as the US Dollar found some fitting via comments from Ben Bernanke and the Federal Reserve. An interesting trade on gold has been a double gold short fund, PowerShares Double Gold Short (DZZ), posting a 15% gain over the last 5 trading sessions, including a 4% gain Tuesday. As economic footing returns and the possibility of rising Interest Rates in the US into next year this is a really interesting speculation play on a breather in Gold's record rally.

Bank Of America (BAC) has indicated its intention of paying back $45Billion in financial rescue money it had received from the Government as part of the Troubled Asset Relief Program (TARP), leaving its banking brethren Citigroup (C) and Wells Fargo (WFC) still without plans for re-payment.

Technology news of the day has several firms in the spotlight. Google (GOOG) has recently hosted an event in which it showcased several new search initiatives including real-time search, which include public updates from social spaces such as Twitter and Facebook, a Google Goggles tongue-twister project, which allows mobile phones running Android, and soon other platforms to take photographs of virtually anything and get legions of information back to the smartphone.

Apple (AAPL) has purchased music streaming service Lala, which for all intensive purposes seems to likely fit into the mold of furthering a cloud based iTunes architecture and perhaps a streaming alternative to the pay for download model the company has currently been enjoying. With all eyes on a potential tablet offering from the electronics company, several publishers are already lining up to create a joint venture that will put the likes of Sports Illustrated and Time magazine in specific new tablet formats with advanced interactive and connectivity features.

In the entertainment world Activision Blizzard (ATVI) set all sorts of records with the release of Call of Duty: Modern Warfare 2, selling pretty much a bazillion copies of the popular franchise video game and making more money in 24 hours than any other release in the history of entertainment.

As Christmas comes around the corner, in the retail and tech space it'll be interesting to see what the must-have gadget of the year is to be. Will the iPhone dominate again, will console wars push to new sales highs, will consumer spending continue to rise as the jobs picture improves on a bedrock of subtle economic growth?

This time of year always seems to set traders into a bullish mood, and that will be especially true if reports of record bonuses from the financial industry continue to ring true. But just remember, Goldman Sachs (GS) can't be blamed for everything, or can it?

Disclosure: Author owns C, GS, AAPL, GOOG

Google Shows Off Chrome OS in Technical Preview

Google's (GOOG) entry into the Operating System space is at least a year away, but the Internet and Search behemoth showed off a technical preview of what they've been tinkering with to an audience of journalists and "techies".

Expanding on the browser that Google released called Chrome, and its currently advertised 40Million user install base, the operating system advanced by Google is a means to the future of cloud computing. All applications on Chrome OS will be web apps and all data is in sync with the cloud at all times. Basically a user would be able to log into any Chrome OS computer and treat it like your own. The Browser is the key.

Major targets for Google with this system are speed and security. With all major components of the OS, either incredibly lightweight or in the cloud, the time to get a computer up and running will be drastically reduced. The demo netbook that Google showed off was ready to go in 7 seconds. The security model Google is working on with Chrome OS is also designed for the Internet age. Building specific locks to the core of the system from applications will allow Chrome to remain unharmed by viral and malicious programs. The Internet connected self-update and synchronization system will essentially allow Chrome users to always have the most current and safest version of the operation system. If something does go wrong, Chrome can re-install a clean version right on the spot and re-sync all the user's data, almost transparently. Some advanced thinking from a company with a lot of advanced thinkers.

But, how will it all work, what about the powerful desktop applications the computing public has grown accustomed to? Well, initially Chrome is situated for a secondary computer, Internet connected for on the go work, like the netbooks and smart-phones of today. As users get more accustomed to living in the "cloud", it is Google's hope that Chrome can grow into larger and more advanced hardware. Internet technologies have also come a long way in the last couple of years, allowing for far richer web applications than in years past. That alone makes the web app only Chrome a solution to think about, as increasingly more work, social and play is done online.

So, what's in it for Google, and more specifically Google's investors? Well, the long-term battle on several fronts between Google and Microsoft (MSFT) just got a lot more interesting with today's demonstration. Netbooks are the fastest growing computer segment, according to several analyst and consumer measurement reports, and it is a field now dominated by Microsoft, first with Windows XP, and now, or so the hope is, Windows 7. Since Chrome OS is open-source and will be free to manufactures, the Zero price point will put a lot of pressure on the folks from Seattle. But to Google, this is the start of a next generation of cloud-only computing users, a part of the business, where from an infrastructure stand-point Google is dominant. The company can afford to guide development here making nothing from it, but enabling a generation of faster, and more secure web surfers, who'll in turn be more trusting of the cloud, and in turn more receptive to tailored Google advertisements .

There's that buzzword again, the cloud. Google, like other giants in the tech space, want to be the big fish in the cloud business. There are other companies that would focus on the corporate market first and get tangible business that way. A lucrative business that will be as well, but Amazon (AMZN), IBM (IBM), Microsoft and HP (HPQ) are all in competition to provide the infrastructure and cloud services for business. Google's reach has always been about advertising to the consumer, and by providing products and services for free, it's building a trust with the consumer that companies rarely have an opportunity to experience. Granted, user data in the cloud brings up many privacy concerns, but Google seems to be able to side-step its way around most issues in that realm, all the while gathering more tailored information about the surfing and shopping habits of its users.

Google's mantra is clearly changing, of course they are still behind the well publicized "Don't Be Evil" but in the new age of computing and business, Google's really striving to serve up "The Perfect Ad". Because the most lucrative ad, is the one that's as tailored as it can possibly be, because it gives the highest potential of a sale, and after all its the sale that drives business. Chrome OS is the next step towards that potential sale.

Disclosure: Author owns GOOG

GPS Investors flee from Google's Shadow

Google Navigator, a seemingly natural extension of existing Google Maps technology that's found on smart-phone platforms like the iPhone and Android, has GPS company investors running from the hills.

The issue isn't that the technology from Google (GOOG) is significantly better, it does look very good and would be a formidable competitor, the issue is Google's affinity to price all-things-Internet at $0. Considering Navigation subscriptions run in the $100s of dollars/year, not to mention the cost of the units themselves, how many GPS users would turn to something else from, for now, trusted Google at zero cost that works on their existing cellular phone? I'd bet many, and the market is betting that way too. Gizmodo (Link), the technology blog, has an informed quick review of Google's entry into the Navigation business.

The sell-off in the market has certainly contributed to some of the downfall in GPS stocks, however major players Garmin (GRMN) and TomTom (TOM2) are down 16% and 20%, respectively.

The age of convergence in technology is certainly upon us, better cameras are coming to cellular phones, better media players are already there, and now GPS navigation capabilities are becoming mainstream. The stand-alone technology gadget/device is becoming a niche rather quickly.

Android, the free open-source cellular operating system developed by Google, is taking off by leaps and bounds this year, with several high profile phones on tap on high profile networks, such as Verizon (VZ), AT&T (T) and T-Mobile in the US. The platform, which recent research has predicted, could overtake the popular Apple (AAPL) iPhone in market-share over the next few years, needs applications like Google Navigator to be exclusive on enticing handsets in the months to come. The Momentum is building for Android and Google is keeping the fire lit with its Navigation application.

The only problem for investors, Google doesn't want to charge for anything but advertising! In all likelihood however, this is the next step in Navigator's life cycle, and Google can continue its march into dominance of the mobile ad industry, just as it has trounced the competition in search.

Disclosure: Author owns GOOG

Technology leading market's rally, a pause ahead?

The 52 week high list looks like a who's who of dynamic companies, with the list being dominated by some of the best and brightest in Technology. The Nasdaq has outperformed its peers on a year to date basis and as several analysts predicted, it is the tech sector that is leading the rally.

The Nasdaq's Year to Date performance gains of 34% dwarfs the gains put up by the S&P (18%) and the Dow Jones (11%). Even looking at the gains since the lows of March, the Nasdaq and technology is still the driving story for the market. Nasdaq at 68% leads the gains of the S&P at 60% and the Dow Jones at 51%. Either way, the bull market rally since March, on the back of the idea of recovery, and finally improving GDP numbers has been broad and long. The Bulls have been on a 6 month celebratory train, but will it last and is Tech's run over?

Not quite, the road to recovery, while already swift due to massive government intervention, still has to play its course and incite a recovery in the job market. Unemployment in America is still rising, though not as quickly, towards the psychological 10% mark. If job creation instead of job losses show up in the remaining quarter of the year, market bulls will have more reason to bang their chests, and more importantly, put their wallet where their mouth is.

Secondly, the housing sector still needs to improve. Articles on the Huffington Post and other sources, are already touting that banks are going back to packaging risky loans, and many analysts are waiting for the other shoe to drop when it comes to commercial real estate. While some may scoff at the success rate of the White House loan modification program, the last estimates put the percentage of home owners helped with refinancing at 13-15%, the fact is there are some getting help. Housing starts were lower than expected most recently but this has been a metric that has consistently come in higher than expectations.

Now, about those 52 week high names. Well technology giants Apple (AAPL) and Google (GOOG) dominate the list, while other techs such as Ebay (EBAY) show up, and even others such as IBM (IBM) and INTC (INTC) are just off those levels.

The prudent thing for the market to do and investors to do would be to take a breather after such a scorching rally of late, however, as market participants are keen to know, markets stay irrational for longer than expected.

Disclosure: Author owns AAPL, GOOG

Can Motorola follow the Palm path?

In a bit of Deja Vu, the conscious feeling not the forgettable Denzel suspense film, Motorola (MOT) is attempting to pick its phone company off of the balance sheet floor with an attractive new handset. Investors have just seen this same story with PDA legend Palm (PALM), as it used hype from its Pre handset unveiled in January of this year to move the stock from $4 to $14 and save a business that was clearly heading in the wrong direction.

The battle in the smart phone marketplace is very heated, with entrenched competitors Apple (AAPL) and Research In Motion (RIMM) slowly gaining market share but gathering much of the mind share, and more importantly most of the profit margins. Recent stats show those two juggernauts grabbing just 3% of the overall cellphone market but an astounding 35% of all industry profits. And for good reason, the companies sell very expensive but heavily subsidized attractive smart phones.

Motorola, which has been in dire financial shape quarter after quarter for what can only be described as forever, hasn't had a hit in the cell phone space since its popular RAZR handset, and is desperately trying to compete in the profitable smart phone segment. By gutting through a lot of the company, and doing away with historically bad Motorola interfaces the company turned to Google's (GOOG) upstart Android platform for its resurgence.

Android, by all accounts is gaining significant traction since the first HTC handset launched nearly a near ago. The platform has been featured in 3 additional phones headed in the US thus far and rumors peg the number of Android handsets at 20 into 2010. This contrasts with the handful of RIM models available and the 2 current selling versions of Apple's iPhone. Motorola is betting with a lot of the industry that the free Android platform can eventually be as compelling and competitive in an industry feeling the need for consolidation in what is becoming an age of mobile applications. If your phone doesn't have applications available its simply not as good, and the beauty of Android, as far at Moto is concerned, is that it doesn't need to worry about pumping resources to create an application hub. The reach of Google is already doing just that, granted it is nowhere near the size of Apple's AppStore, but Android does boast the 2nd biggest mobile application catalogue. Nothing to scoff at.

Enter the Motorola Cliq, the world's first social phone, as the company claims. The phone is built on Android, but Moto's designers have layered an interface that directly ties in a user's Facebook, MySpace and Twitter contacts and status information. The social aspects of the phone are sure to resonate with a younger smart phone buying public and Motorola has shown it can indeed build something of higher quality. Will the phone be able to compete in the space? Sure, but will it gain any significant market share? At least one analyst seems to think so, as a note was published putting 4th quarter Cliq sales at about 750,000 or an estimated 5% of Moto cell sales. 5% may not seem that significant, but with a hefty subsidy, Motorola could start to see some real revenue from its new headlining handset. And after all, Moto essentially bet the company on Android less than a year ago, so we're guaranteed to see several handsets leveraging the new interface.

While specs are impressive, price will be a key differentiator for consumers. In the age of the $99 iPhone 3G and the higher capacity $199 iPhone 3GS, it is sheer lunacy for other players to think they can charge more and gain any sort of traction with consumers. Thus far though, Investors are jumping in and believing in the robot that will eventually have come to save Motorola from the brink. Shares are up 7% today and gained more than 10% since the device was officially announced. Here we go again?

Disclosure: Author owns AAPL, GOOG

End of July Market Musings & Microhoo deal

As another month comes to a close, the market's resistance proof rally continues on the strength of strong earnings and more signs of a waning recession. GDP numbers out for the previous quarter showed a decline of 1% in American GDP, this was better than the expected 1.5% decline, which showed economists that slowly but surely the United States is making its way out of the recession.

But the markets knew that in March right?! As the S%P continues to fly from March lows of near 650 to to cusp of 1000 yesterday. Just about a 50% rise for the broad market indicator. The real driver of this continuing rally is the strength in Corporate Earnings this quarterly season, which will be a difficult act to follow for the remainder of the summer as those results fade and current unemployment rears its head again. However, companies now have learned, adapted and retooled their operations and streamlined their businesses during the economic bottom (1st quarter of this year) and are now awaiting the increases in demand that are expected to come in the 2nd half of this calendar year.

On the deal front in recent news, was the Internet Search deal between Microsoft (MSFT) and Yahoo (YHOO). By combining search operations to Microsoft and sales operations to Yahoo the companies hope to put a dent into market leader Google (GOOG). However, the deal has widely been panned for Yahoo, with Investors sending shares down heavily in the few days after the deal was officially announced. The partnership is a revenue sharing one with no payments made upfront and is a far cry from the $40Billion buyout offer Microsoft initiated, nor is it even close to the $1Billion Microsoft most recently offered in cash along with Billions more in stock purchases.

The news media certainly has the right grasp, as the deal, which Yahoo had always held the upper hand on, has gone completely to Microsoft. Yahoo essentially gave away 20% Market Share in search, for cost savings and the chance to deal with all the sales hassles related to Search Advertising between both companies. Microsoft will now control about 28% of search queries through its new Search Engine but it still has a ways to go to get to the monetization levels Google has spent the last few years achieving. And that doesn't even begin to mention the complexities in integration relating to the now-coined "Microhoo" partnership. Executives at both companies expect this to take 2 years to get through fully. That's about half a lifetime on the Internet I'm afraid, so while Google will wave its hands and put pressure on both companies to drag out the legal battles, secretly they've got to be happy, as 2 years of distractions await their newest competitor, now with 8.5% market share, Bing!

Disclosure: Author owns GOOG

Google's Vision of Life to be Subsidized by Advertisers

The techno-worlds of open-source and standards-compliance are united in celebration on the heels of Google's (GOOG) announcement of a new and upcoming platform called Chrome OS. A new giant has awaken to try and breach the Windows stranglehold of the modern world. Free and widely available Linux couldn't do it, the fawned-over and renowned Mac OS X still can't do it, but perhaps the quirky little giant that is Google can lead a way towards universal, free and open salvation.

Google's announcement that it is in fact working on a full fledged Personal Computer Operating System shouldn't really come as a surprise given that over the past year and a half it has launched the Android OS for Mobile Devices and Chrome, the first browser to have individual process management, a staple of every flavor of operating system in the modern computing world. Rumors of Google's OS work span back years in the blogosphere, but nothing was concrete until today's unveiling of Chrome OS, an operating system to run on full household computers based on Google technology and an open source Linux under-pinning.

By marketing this move into Operating System territory on the back of its growing Chrome browser user-base, Google is squarely taking a web-centric view of the computing world. Coincidentally, after years of perpetual beta, Google removed the beta label off of several products in its Apps suite, charting a path towards an enterprise serious attitude that the company has of yet never employed. First Google Apps gets a fresh coat of grown-up paint and now Google eyes the netbook market as the first for its full fledged operating system. Microsoft (MSFT) better not turn a blind eye to these threats like it has to others who have tried to vault into its dominant space.

After mostly shrugging off Apple's jabs at Windows Vista and watching itself slowly but surely lose some market share, it still took the worst worldwide recession in generations to get Microsoft's attention to start firing back at competitors. This is a company that cannot afford to rest on its laurels, nor one that can afford to blow dollar after dollar in a blinding struggle for relevance in markets that it is an also-ran in (i.e. Internet Search). Google's head on assault began years ago as it made the web (and inherently itself) the first destination for millions of computer users, then it got them hooked on a new way of looking at e-mail, then followed that with calendars and slowly simple documents and spreadsheets, all while being dismissed by market leaders as too simple or too weak for real use. Newsflash to those competitors: Majority of people only really need simple and weak, and powerful office suites and complex operating systems exist on most computers because there was no other choice!

The web browser is the portal to the new technology world and Google, Microsoft and Apple (AAPL) all know it, however Google's become the most nimble of the three at being able to adapt to it. Chrome was a starting point, and while getting 30 million users in 9 months is a good start, it is still just a tiny fraction of the web population, so Google's got a long way to go before it can claim the browser Chrome a success. Chrome OS on the other hand is a different animal, it'll be the only thing users need to get up and running on a new computer while having simple native tasks be quick and web tasks even quicker. As new web technologies evolve along with the growing presence of "offline" web apps, there was still always a need to have some distinction between the browser and the operation system. That line is blurring and perhaps Google's figured this out and may just have found a way to combine the two under Chrome's umbrella. Brilliant, if it were available today, but unfortunately for Google and its users the creation of a platform needs the help of several building partners, since no one buys an operating system off the shelf these days. Except of course for loyal Mac purists, which love having their Mac OS X be the latest and greatest, and given Apple's pricing commitment to the next version of OS X its a hard upgrade to pass up. Kudos to Apple for figuring out people can still want to buy software off the shelf.

$29 for a new version of an operating system, that's an incredible price from the folks at Cupertino, and something Microsoft's bean-counters certainly cannot match with Windows 7. However, someone can, and that someone is Google! Chrome OS, like the Chrome browser, is of course based on open-source software, and in and of itself will be open-source, just like Google's Android OS is for mobile phones. What that means is that Chrome OS will cost NOTHING to computer manufacturers who will shoe-horn it into the netbooks/laptops/desktops of the future. Tough to compete with free! Especially if its quality free from a source as reputable as Google.

But herein lies the rub, what's in it for Google? All these free services and platforms can't just be a secret desire to topple the greatest technology behemoth of all time, can it? Of course not, Google's clearest path to monetization is to get users onto the web as quickly, efficiently and distraction-free as possible, because it wants to be the one doing the distracting with advertisements of all shapes and sizes, from text ads in search, to display ads on the network, to video ads on youTube and everything else under the sun. How do you provide web users the easiest route to the web? Well build your own free multi-lane uber-autobahns with Android and now Chrome OS. The two pillars of the web of the future and Google will have troops at each one, mobile and home computing.

The more time users spend on the web, and the more tasks they begin shifting to the web, the better for Google and the more opportunities Google gets to serve up ads from its vast and numerically superior stable of advertisers. This is why Google is free, in its eyes Life should be subsidized by advertising, and advertising of the future will all become Internet based and completely traceable because it gives the advertiser complete metrics and Return-On-Investment calculations to the tiniest detail that are unmatched in any other ad-based marketplace. And as Televisions and Radios become Internet enabled in the future, bet Google will be right there with the expertise to build out a similar type of ad network. Google is more than willing to subsidize its own development costs if its able to produce a pathway to a Google-centric web that others wouldn't or couldn't replicate.

As encompassing as technology and the web already are in everyday life, we've yet to scratch even the earliest of limits, with every piece of new technology becoming web-enabled the inter-connections between people and their technology becomes further encompassing, with the cloud becoming a centralized hub forcing information separation to consist only of virtual borders. A prospect not completely sold to business just yet, but the power of the crowd, and the cost-effectiveness of the cloud will break down those barriers. How will all this happen, and who will pay for it? As Mark Cuban recently wrote about the prospects of free business, the biggest problem is the continued expectation of free and the inability of the biggest pushers of free-service to keep costs in check and monetization opportunities plentiful. That thesis is very much on the mark, no pun intended, by how it related to business, but what it misses, is the relationship of consumers as the end-goal for the real buyers of free: The advertisers.

The Internet, being the disruptive technological platform that it is, essentially drives costs of everything to near zero. This is due to the simple phenomenon that if everyone is connected to everything, there's always someone who'll do something for cheaper, until the cost of that something is driven close enough to zero to become minuscule. And the ones paying the bills at that point will rely on advertising for profitability, and the advertisers will rely on their ads working to then sell products and services and in turn pay their own bills. Google just happens to be the biggest entity making use of the free economy that is the Internet, using all of its advertisers to pay for its storage, bandwidth and corporate costs.

Advertising is funding an over-indulgence in all things web, but subsidizing life, that seems like a stretch right? Currently yes, but as the computer and the Internet is engulfed by all of the younger generations for communications, commerce, entertainment, social networking, dating & relationships and more, it will start to look startlingly close to the major components of life.

Imagine if the brick & mortar world worked this way? Say there was a Google that would pay for everyone's gasoline, provided they had a billion lane road to a super-shopping center, and drove a car they purchased but had customized by Google to point out interesting things along the road and showcase the occasional billboard tailored to an individual's needs and previous purchases. How many would turn that down? And after sometime of that model working, I'd say the brick & mortar Google would even be willing to take you to the lot and pay for the vehicle, guaranteeing it would always work perfectly on those roads to the mall. All subsidized of course by your friendly neighbourhood Spidermen, umm, I mean Mad Men.

Disclosure: Author owns GOOG, AAPL

The Google Cash Machine

Henry Blodget of Alley Insider probably said it best after Google's (GOOG) Calendar Q1 results crossed the wires: "cash flow will knock you silly" (Link). While the overall economic situation has admittedly hit even the mighty search giant, by controlling costs at unprecedented levels the company was able to generate $2Billion in free cash flow in the quarter. Just Staggering.

Being a heavy market share leader in North America and an even bigger leader in Europe, Google's revenue growth had to come to a halt at some point. The global downturn and recessionary attitudes of advertisers have made that growth halt quicker than previously anticipated. Google earned $5.51Billion in revenue which was a 3% drop quarter over quarter. When factoring in Traffic Acquisition Costs, Revenue came in at $4.07Billion vs the $4.08Billion expected by the street. Pretty much in line there.

Earnings pre share blew past expectations and even increased from the December quarter on a non-gaap basis. $5.16/share this quarter versus $5.10/share last quarter and $4.84/share last year. The bottom line expands while the top line contracts, the textbook cost-cutting profit driver. This also precipitated a similar uptick in operating margin, which was at 34% and 39% on a gaap and non-gaap basis, an increase of 1% and 4% from a quarter and year ago, respectively.

The cash is the real story here though, and even though management is very conservative with its $18Billion war chest, the company now generates from its operations enough cash to buy General Motors, twice! Every 3 months! What's even more remarkable about this is that it isn't some oil baron, or enormous retailer, it's a silly-named 10 year old Internet search engine that dabbles in advertising. To say Google dabbles in advertising is of-course the understatement of our still young century. The company has moved in and out of, with some great and some not so great successes, every form of advertising, but now more than ever is the Internet advertising sector helping it tremendously as rivals are sputtering.

The general nature of Internet browsing was built on the basis of tracking capabilities, and as the generation of today puts more and more of its life online advertisers are looking to target with greater accuracy driving substantially higher ROIs. And guess who's the best at delivering high ROIs? Google of course. As dollars keep shifting online, where ROI is trackable and higher, Google stands in the best position to keep reaping the benefits. And if the company is doing this well keeping costs under control and generating cash flow in struggling economics, it'll be that much better riding along on the road to recovery.

While there are some chinks in the armor, bears would be quick to point out Revenue decelerated for the first time ever and the company is going into 2 straight seasonally weaker quarters. A seasonality weakness that will only be exasperated by current down-trending economics. But with its main rivals continuing to stumble over and around each other (Microsoft search bleeding cash while Yahoo struggles with an identity crisis), Google can afford to run its main business efficiently and look into further growth areas such as Mobile and online productivity applications.

Google has built itself such market and mind share in search that it can certainly sustain itself on that future hardly breaking a sweat. But if DoubleClick, YouTube, Google Apps or Android start to make the company any serious cash, watch out below, because the company will then be on a blistering pace to reach its own lauded goal of being a $100Billion yearly revenue generator. While response to the latest numbers has been tepid to say the least, Google at $400/share, looking to make roughly $20 in EPS and having a free cash flow rate of about $8Billion yearly just screams must-own. With each passing quarter it is making less and less sense owning second best.

Disclosure: Author owns GOOG

Anatomy of a Trade: Selling Calls in a Bear Market

Risk is without a doubt the de-facto component of any investment. There's certainly no free-lunches out here, especially in the Bearish climate traders are finding themselves in. With the majors touching November 2008 lows, the already fragile marketplace finds itself hanging by mere strings from a profound loss of confidence.

Anatomy of a Trade, as this article is titled, is thought of as the first in a series of pieces attempting to give some insight into a Traders mindset, which seems more prevalent now given the climate. A consistently volatile and bearish mood of the marketplace, can often cloud sound reason decision making by forcing a Trader to maneuver more swiftly and determinately than typical.

First, a brief introduction to the concept of selling options. Wikinvest (Link) has a brief primer on the concept of "covered calls", which in laymen speak is the process by which an Investor holding a stock position sells a call option to the marketplace giving another Investor the opportunity to buy said stock position at a pre-determined price on a pre-determined date. Several good and more detailed resources exist on the topic both online and off .

How this trade started! WC Power Tech Fund holds in its portfolio long positions in both Google (GOOG) and Goldman Sachs (GS) and as January was coming to a close, Covered Call Option positions were opened on both securities.

Jan 22: Covered Call Option position sold for Goldman Sachs with a strike price of $85 for February netting a premium of $2.23 per share.
Price for GS: $71

Jan 23: Covered Call Option position sold for Google with a strike price of $350 for February netting a premium of $5.70 per share
Price for GOOG: $324

Selling Covered Calls doesn't exactly tickle anyone's risk bone in the slightest because in the best case the options expire worthless and the seller keeps the premium received and their stock, and in the worst case the seller keeps the option premium but has to also sell the stock at the strike price despite the fact that in the market the stock is trading at a higher value. Either way there's technically no "loss" if an Investor chooses a comfortable Strike Price for their position.

How the Selling Covered Call strategy works against an Investor is the "potential lost profit" on a stock that continues to surge. And this is exactly what happened during a two-week run for both Google and Goldman Sachs stock prices as the Market experienced a Bullish bounce. The value of the sold options went increasingly higher and to buy the options back at market prices would have led to losses of 4 to 5 times the initial premium received.

Within a week the prices of the option positions were as follows:
Google Feb $350: $14.20
Goldman Sachs Feb $85: $8.35

This is where that seductive element of Risk steps through the door. The Naked, or Uncovered Call Option. Staring at unrealized losses on a short position of 400-500%, the Trader has the Option (pun intended) to sell more options. These are different from the original sales as the Investor doesn't currently have the stock to offer if the prices remain this high.

But in a Bear Market, the Anatomy of this trade had 2 main parts: Sell Uncovered options at the same strike prices to drive up the average selling price of the position. The thinking was that Bearish tones will overtake the general markets and bring prices back down prior to expiration of the options. This would present the ideal opportunity to close out this trade, by buying back the uncovered and covered options for less than a now increased average selling price! In simple terms, turn this heavily negative current position into a profitable one. That was the goal.

On paper, its a very risky trade, as the losses are potentially limitless if Markets kept proceeding higher. But by sticking with the prevailing notion that the Markets are Bearish, a small spike in prices presents an opportunity to sell into if not at the peak.

Initially the small spike, wasn't so small at all and both Google and Goldman Sachs kept being bid up and bought ever higher. By February 9th: Google's stock stood just shy of $380 (nearly $60 higher) and Goldman Sachs shares fetched $98 (nearly $30 higher). Nothing short of a complete disaster for a short-term trade.

Option prices on February 9th:
Google Feb $350: around $30
Goldman Sachs Feb $85: around $14

Some simple math based on the first covered call sells shows that the Google position had increased over 5 times! and the Goldman Sachs position had increased over 6 times!.

However with continued Uncovered Option selling mathematically the potential loss didn't look so daunting and the continued collection of premiums had built a cash position for the fund. The risks associated with the accumulation of short call positions in both Google and Goldman Sachs was that as expiration dates loomed ever closer the fund was on the hook for an increasing amount of stock, should there not be a sell-off.

So, what is the thinking at this point. The trade has gone against the Trader, and perhaps the smartest thing isn't to continue selling into the wind. When purchasing stock you're told to buy a position in pieces in an effort to average down if the stock moves the opposite way. Same thing applies to selling short, both stock and options. Whether this practice is smart for uncovered option positions in clearly debatable, it is however absolutely possible. By continuing to sell more Uncovered Call Options the average prices of each position had increased 3 and 4 fold by the infamous February 9th date.

Infamous because that day proved to be the peak for both Goldman Sachs and Google stock. The initial theory was beginning to prove correct, albeit after many days of market-watching worries and frantic paper loss calculations. By using Uncovered Calls the positions had grown but so had average selling prices.

January 23 & February 9th Position Average Selling Prices:
Google Feb $350: $5.70 on Jan 23 --> $17.10 on Feb 9
Goldman Sachs Feb $85: $2.23 on Jan 23 --> $9.10 on Feb 9

Now that initial convictions had been proven correct and the Market began making its way to November 2008 lows the current prices of both Option positions fell dramatically. As expiration approached, the Trade should look to be closed, and with that the Uncovered Call contracts bought back.

With each passing day in the third week of February the markets slipped and along with them, were the share prices of Goldman Sachs and Google, closing Thursday at $86.01 and $342.64 respectively. The WC Power Tech Fund closed all outstanding Google and Goldman Sachs option positions on Thursday. So although the bullish market spike in late Jan/early Feb as a threat proved formidable it was not, in the end, insurmountable.

February 19 Position Buy Back Prices:
Google Feb $350: position bought back for $1.54 --> net percentage gain
(kept 91% of option premiums received based on $17.10 average selling price)

Goldman Sachs Feb $85: position bought back for $2.54 --> net percentage gain
(kept 72% of option premiums received based on $9.10 average selling price)

In a market that hasn't been Investor friendly for a long time, there are Trades that can be very profitable. The Uncovered Call brings with it enormous and limitless risks, which don't translate well to the average Investor. There are easier ways to exploit Bullish Market spikes in a Bearish market, and options are one of the most cost-effective ways to do that. They are also amongst the riskiest. The WC Power Tech Fund uses and has since inception used Covered Call selling as a monthly income generator, to supplement dividends and supplement or offset capital gains and losses that positions incur.

So for all those nail-biting moments earlier in this month with these option positions, the end proved to justify the means, this time, and what was a very risk-intensive trade turned profitable in this inaugural Anatomy of a Trade.

Disclosure: Author owns GOOG, GS

Google and Apple bring back Tech Leadership Clout

With e-ink around the country still fresh from Apple's (AAPL) very strong results, the fact remains the old school ink business is dying, it was Google (GOOG) ready to take the Market stage. Technology Sector leadership has remained vacant during the economic turbulence World Markets have taken but as two of Jim Cramer's once famous 4 Horsemen of Tech, these companies were ready to stake their claims not only to leadership but in-turn "recession-proof-ability".

Bearish attitudes towards consumer spending, global economics and market sentiment led analysts far astray when it comes to the growth engines that Apple and Google continue to be. Apple beat analyst estimates by a whopping $0.40/share ($1.78 vs. $1.38) and as Google's numbers cross the wire the non-GAAP measures had outdone analysts by $0.15/share ($5.10 vs $4.95). Much has been written on the web about yesterday's Apple results already but a recap of the WC Power Tech Fund Apple earnings preview can be found here. (Link)

As for Internet giant Google, the mood was more somber coming into this quarter in light of reports of slowness in advertising and that Google had let go 100 recruiters and shut down several products and services. But with $5.7Billion in total revenue and $4.22 Net Revenue (beating expectations by $100Million) the train is still very much on the rails.

The search advertising leader continues to grow with 18% year over year Revenue growth and 3% quarter over quarter growth. Most of this growth can be attributed to the growth in paid clicks which saw 18% year over year growth and 10% quarter over quarter growth. Much has been talked about this quarter that Google was introducing several money-making initiatives and shuttering money-losing ones. Google was experimenting by showing more paid ads per search, brought more ads to video-site YouTube, and showed ads on Google Finance, Google News and Image Search for the first time. These initiatives went around the blogosphere and came back again with two general sides to the thesis. Clearly split between the Bear and the Bull.

1. Google is looking to blow away Wall Street and show everyone who rules Internet Advertising
2. Google is really struggling and needs everything it can to meet numbers

With the highest Revenue quarter in its history Google clearly didn't have its mind on struggling to meet expectations. A company that praises long-term growth and doesn't provide guidance to Wall Street would seem far fetched to really be under the gun as described in point 2. With Google expanding its reach across in Internet in nearly all geographic areas and adding to its cash horde quarter after quarter it is much easier to be bullish from here on out, despite the uncertainty over macro-economics.

With a 2nd business model out there somewhere, Google is sharpening its focus on Search and Ads, Mobile and the Enterprise. With AdWords and AdSense, the Android mobile Operating System and Google Apps Premier being pushed harder, management thinks large scale growth is still very viable from several Revenue Streams.

One of the biggest areas of improvement for Google was prudence in Capital Expenditures, which is significantly down from quarters past. After years of free-wheelin' spending on infrastructure, given the downturn it certainly pleased Wall Street to see Google be more mature with its spending. Estimates have pegged Google's technological advantage over competitors as great as 2-3 times. The fat years of data center spending have given Google incredible scalability in its infrastructure and allows it to afford quarters of prudence when it comes to spending. Which can't hurt when it comes to the bottom line in trying times.

One of the biggest advantages and leadership qualities Apple and Google have in this space is the ability to generate cash. With Apple having added another $3.5Billion to its cash horde and Google generating Free Cash Flow of $1.75Billion this quarter, the war chest of these Horsemen stand at $28Billion and nearly $16Billion respectively. In an economic downturn the ability to be nimble and invest strategically is an extrodinary benefit, that Investors likely will not see for some time. However long term growth and continued success are a direct result of investment. Google's cash horde has certainly been more active with buys of YouTube and DoubleClick.

Apple and Google have shown an ability to invest strategically, with Google making the bigger direct splash in the acquisition space, but both companies, while inexplicity linked in the mindshare of Investors have once again jumped to the forefront of the Technology sector with very strong business results in a climate other companies have described as catastrophic. It is the firms commenting on strength of business and not weakness of environment where I want to be invested.

Disclosure: Author owns AAPL, GOOG

Microsoft's Search Strategy: Mo' Money Less Problems

With the Consumer Electronics Show having more of the media's attention than in recent years it was an opportune time for Microsoft (MSFT) to make the kind of splash during their annual speech the company needs. Granted part of the reason of the shifted media was Apple's (AAPL) MacWorld keynote speech, valiantly presented by stand-in Phil Schiller, focused on Apple software updates and lacked the ominous flair that "El Jobso" exudes or the shiny new toys gadget-connoisseurs have come to expect.

While Apple CEO Steve Jobs took a backseat this January it presented Microsoft head Steve Ballmer with a chance to speak at CES and present Microsoft's vision for not only renewed hope on its Operating System and Mobile front, where it's losing share to Apple, but also in Search, where it heavily trails juggernaut Google (GOOG).

While Microsoft has long tried to make inroads into Search, the company's approach has been the Biggie Smalls to Google's Puffy: "Mo' Money Mo' Problems". Year after year of throwing Billions of dollars at the cause hasn't resulted in any significant traction for Microsoft and in fact latest metrics show continued search share erosion. October-November data from comScore puts Google growing from 63.1% to 63.5% while Microsoft remains in 3rd place behind Yahoo (YHOO) falling from 8.5% to 8.3%. With the December holiday season on deck and the increase in search queries to boot it only stands to reason that Google continued to heavily outpace its two rivals.

Someone at Microsoft has been thinking about the late Notorious B.I.G., and finally the company has decided to try to turn the popular song around in its favour. The new strategy involves outbidding Google at every turn in order to put Live Search in front of as many "default" consumers as possible. It's a well known industry practice that companies pay hardware makers to have their products and services installed on default machines. Computers from Dell, Sony and HP all come with software from a variety of vendors beyond the standard Windows operating system, and recently this system has extended beyond hardware into web services as Google is in a deal with Mozilla (the makers of Firefox) to be the default search engine for the popular web browser. Microsoft hopes that by having many more default eyes on Live they can retain a high proportion of those users and turn them into searchers and ad-clickers. In essence: Mo' Money Less Problems.

Microsoft announced a couple of these partnerships during their CES presentation. The first with Dell, to have Windows Live essentials software pre-installed on all computers, which includes various software components including a browser toolbar and default search. The second with Verizon, and this may end up being the bigger of the two, to make Live Search the default search engine on Verizon phones. Microsoft clearly gave Verizon much better terms than Google as both companies were reported to be in the running for this deal. The 5 year exclusive partnership will see Microsoft search be put front and center to customers of now America's largest wireless carrier by subscribers.

Google of course now has its own Andriod operating system for Mobile devices and will look to that for growth, it also is the default search engine on Apple's incredibly popular iPhone and has its own Mobile Search application in the App Store. With an increasing number of web users becoming acclimatized to "google-ing", it will be difficult to say with certainty how many default users Microsoft can expect to keep for these partnerships. And you can certainly expect Google to be front and center in providing users with ways to have Google Search be installed alongside Microsoft's default offering or to replace it altogether. Either way shareholders of Microsoft need some sort of spark from the company, and with Windows 7 getting good press thus far, the Xbox successes and now the possibility of gains in Mobile and Desktop search the company may be finally ready to turn the corner.

Disclosure: Author owns AAPL, GOOG

Tale of Two Cities in Internet Search

As Yahoo (YHOO) prepares another quarter analysts are looking ever more skeptical about the company's turnaround plans. Job cuts and salary cuts are being covered with increased scrutiny around Yahoo by major media outlets signaling the planning stages are well in the works. As the once proud Internet giant continues falling not so gracefully to its current second fiddle role in Internet Search and Advertising, Google's (GOOG) juggernaut keeps growing.

Yahoo has always had success in branded display advertising, which typically is the focus of big, established corporations and in times of economic slow-downs it is those businesses that are likely to soften their budgets. Yahoo's Finance pages have been decimated as trading houses and banks continue to shutter their doors or merge with each other for survival. Google's strength lies in its search advertising which is available not only to the giant corporations, but millions of small enterprises and basement shops around the world. Got a website? Want advertising? Bid on a few keywords and drive traffic, and that's not even mentioning the massive breadth of "Ads by Gooooooooogle", or AdSense in corporate speak.

Yahoo's next generation Panama Ad system hasn't been to glowing success yet that the company had hoped for and as the stock tumbles into the $12 range, how grand does the $31/share offer from Microsoft (MSFT) earlier this year look now?

Granted Yahoo generated almost $7Billion in Revenue in 2007 and had net profits of over $600Million but it still has not found effective ways to turn its huge user base into a profit generating machine. While the rumors of lay-offs, cuts and salary readjustments are making the rounds within the Yahoo mills, it's toughest competitor just finished blowing the doors off of another highly profitable quarter. Google reported earnings (excluding items) of $4.92/share, beating estimates that had earnings pegged in the $4.70s ranges. Income for the period for Google was $1.35Billion ($4.24/share with special items) and executives at the company made certain to claim, several times, during the conference call that those millions of seemingly little ad clicks are considered as "recession-proof" as advertising can be because of the sophisticated performance and accountability metrics that are available as part of Google's AdWords toolbox.

It seems that as Yahoo continues to harp on the economy as the cause of its slowdowns, mostly in the bread and butter display area, the bigger brother at Google finds ways to be more efficient and more effective. Something has to change within the culture and structure of Yahoo to stop the bleeding. Maybe wholesale cuts are the beginning or maybe they are desperate measures in trying times, but if anything is certain Yahoo needs to put focus back on its user base, and it has to draw up interest within that base to use or try out all the tools in the company's arsenal.

Bottom line: The company is not doing an effective job in convincing its huge pool of Mail and Messenger users to search at Yahoo or to use Yahoo Calendars and other services. Luckily for Yahoo, it is not alone in this problem as Microsoft is unable to drum up any significant interest in its Live Search platform either, standing in a distant 3rd place in search queries.

The heralded premium web portal that once was Yahoo needs to show some Internet savvy at a time when individuals all over the country are zipping up their pockets. While analysts estimate earnings of $0.09/share this quarter and $0.53/share for the full year, and the same $0.53/share for next year, Yahoo's growth story is all but over in the eyes of Wall Street. But it doesn't have to be if Yahoo puts its users first and plans for tighter user experience and integration over the next couple of years.

Yang and company need something to pitch to Investors of Yahoo, and growth plans revealed months earlier that are surely for naught now with the latest economic troubles will not stop the bleeding. To convince the traders these days, the company will need a real surprise in results in addition to job cuts across most if not all its divisions. Get back to a core user focus and have a 2 year strategy ready to restore the luster of the once crowned King of the Internet. As a once proud Yahoo shareholder, if only for nostalgia sake, this company needs a turnaround story the Internet public can get behind.

Disclosure: Author owns GOOG, holds no position in YHOO, MSFT

Google throws its hat in the Browser & OS ring with shiny Chrome

Joining a "war" is neither a decision taken easily or for that matter lightly, especially one that historically has seen incumbents muscle and push out thriving rivals, (see Microsoft (MSFT) and Netscape) but Google (GOOG) is not just any company, and it hopes that in the future of web computing Chrome wont just be any browser. And with it perhaps change completely the role of the browser from presenting web pages, to managing web applications in the computers of tomorrow.

Lofty ambitions I know, but this is the same company that has plans to index the entire web, present a photographic view of the entire world, create renewable energy cheaper than coal, and house the complete archive of human information since the start of the written age. Google's getting well compensated for the lucrative advertising network it pioneered in Search and with that comes radically thinking about ways to out-innovate, out-maneuver, and out-class anything offered by main competitors.

Google's newly released "Beta" Chrome web browser is another hat in the ring that contains Microsoft's Internet Explorer (70% market share), Mozilla's Firefox (20% share) and Apple's (AAPL) Safari (6% share). However it has the potential to avoid the also-ran results of other browser efforts and truly usher in an age of web-computing. If this sounds like techno-babble, that's because it is, and Chrome is definitely not any sort of catalyst for Google's ailing stock right now.

View the GOOG WikiChart on Wikinvest

Unfortunately only blowout quarterly reports can do that for this richly valued company. The company is down significantly from all-time highs and Chrome will not get them back there anytime soon. This is an evolutionary step that just might end up being revolutionary when all is said and down.

Google's cash cow of serving up targeted advertising works now because it can collect information on users, their web habits and their searches. The more people who have Google Accounts and the more searches they do, helps Google tailor all those ads. Throw in the popular Google toolbar collecting user information and viola you've got an incredible breadth of information in which to base ad serving decisions on. However, browsers are evolving, not only from a functionality perspective but from a privacy perspective as well. Microsoft's newest browser will incorporate an InPrivate feature which will not store anything users do on the web if they choose to use it. If Google can't know what you've been doing on the web for the last 6 months those ads could start looking less and less attractive and Google will have to only rely on what users search for, assuming of course they use Google for search. Chrome has a similar feature but getting users on the Google experience is priority number 1 for the company.

While the above is a minor detail for browser technology, it is the main driver of Google profitability. The next driver of profitability, Google hopes, will be Web Applications, and their Google Apps suite which is shaping up with constant improvements to become a true Microsoft Office competitor. The difference of course is that Office you install on your own computer, whereas Google Apps, and the online suite of Productivity software, can be accessed from anywhere and collaborated on in real-time.

Industry people believe the browser will become the Operating System of the future!

Considering Microsoft's Windows is on 90% of computers, it is almost an impossible mountain to climb for someone new to create an Operating System. For Google, and looking into the future of web based applications the most logical step to creating an Operating System would be to create the Web Browser of the future. And in a matter of speaking they did.

Where previous browser were a single application that served up web pages and ran applications within itself, Chrome spawns processes for each web page or web application, and includes a task manager to manage them. If something crashed on one web page, only that web page would fail while others would remain perfectly isolated. Process Task Management, Individual Processes for each web application sounds a lot like an Operating System to me. If Google wants to get serious about challenging Microsoft in the OS and Business Software games in the years to come it needs to control how users will access their web applications. A Web Browser that controls each web application individually, and even each component of each web application individually, is exactly the steps Google has to take.

By creating Chrome they've started this journey, and by making the entire project open-source and given out for free, they can quickly and nimbly adapt suggestions, improvements and changes from the developer community at large. As with a first release there will always be kinks to iron out, however the prognosis looks really good, and with a feature set comparable to the fastest growing browsers, in terms of popularity, Firefox and Safari, Google has the brand power and the clout to make a real dent in this industry. It is hard gaining market share in anything, and in the browser-war it is notoriously difficult so by throwing its hat into thing ring, Google's also throwing caution to the wind and hoping they'll be early enough for the web revolution.

Just don't expect the revolution to happen overnight Traders!

Disclosure: Author owns GOOG

Verizon looks to a Future as the Biggest Carrier with reported Alltel buyout

The deal, which is reported to be valued at $28.1Billion certainly isn't a drop in the bucket for Verizon (VZ), but it does show just how aggressive the mobile space will be in the years to come. With an estimated 3Billion people with mobile phones worldwide, the subscriber growth curve is certainly getting to its last legs, if it isn't already there.

To paraphrase the famous Narcotics Trafficker, Stringer Bell, from the wonderful David Simon created HBO drama The Wire.

"That guy we got down at the pit working for us, now he's got the one cell phone I gave him for re-ups, and he's got another cell phone only for when the girl calls, now if a low level guy like that can have 2 cell phones, how you gonna sell any more phones? That's market saturation right there"

The above was obviously cleaned up and paraphrased, as HBO is well known for cutting edge programming and not being shy when it comes to expletives. The point is still very valid. Not every customer in the country is going to have multiple cellular phone accounts, so saturation is a big concern for Verizon and its competitors AT&T (T) and Sprint (S). So with subscriber gains mainly coming out of the pockets of other carriers the way to increase the top line is to purchase smaller regional carriers, or have the breakthrough product that most users will want and will need to have.

A lot has already been written about Verizon's unwillingness to work with Apple (AAPL) and secure the iPhone rights, essentially handing the break-through device to rival AT&T. More recently however, the company has been on the soapbox about going open with its mobile phones, even including the possibility of using Google's (GOOG) Open Source Android mobile platform on some phones. As customers in the US grow, with regards to their mobile phone usage and feature expectation it'll be up to the carrier to foster an environment of functionality, ease of use, and customizability. With the industry headed in that direction, the playing field should be level.

So when Americans emerge in a future where cell phones will be open, customizable and feature-plentiful on a seemingly level playing field, how does a carrier win? It's simple, have a bigger stick than the other guy! And in the world of mobile phones, that means more subscribers on better, faster networks. Verizon's got the network part down, but was playing second fiddle to AT&T when it came to US subscribers. With this deal, not any more. Combining Alltel's base with Verizon's will make VZ the biggest carrier in the US, couple that with it's recent win in the 700Mhz Spectrum auction and Verizon is looking to secure the face of the Wireless Nation for the next 10 years.

Alltel was taken private just last May at a price tag of roughly $27.5Billion on a combination of debt, equity and a tremendous amount of leverage. It seems the private equity partners, TPG and Goldman Sachs Capital Partners, were looking to make a quick buck here and get out while they could with even the slightest of profit, even though at current levels Verizon would be paying a reported 8 times earnings, while last year's private deal fetched 9.2 times.

While the price tag will be debated Verizon can certainly justify the purchase as it builds for its future with as many subscribers as it can. And on top of that, it now has a whole new database of addresses to send letters to recommending an upgrade of existing Internet and Television connections to Verizon's high speed FiOS, the fiber optic solution VZ has spent tons of time and even more money rolling out across the country.

Update: June 5/2008. Official aggregate deal price of $28.1Billion

Disclosure: Author is long T, does not own VZ or S