Thursday, 18 October 2007

Google valued at $195 billion

Google risks hurting itself and the internet sector by not splitting its stock, it was confirmed by technology analyst Mark May at Needham & Co. This was the conclusion by Mr May who has become alarmed at the headlines surrounding the Google share price's surge through $600 (£300) barely three years after they were floated at $85 (£42.5).

Google’s quarterly results are due this evening and are attracting more than their usual amount of excitement and nervousness. Mr May says “Google should consider to split its shares into 10, with new shares valued in the $60 (£30) -$70 (£35) range. Unfortunately, retail investors and the mass media are often confusing a high stock price with a high valuation," Mr May continued to say that "Some, and possibly many, are interpreting 'Google $700' as a sign that the internet bubble has returned. We believe this misperception is bad for Google shareholders and for the internet sector at large."

There is no doubt that Google's valuation is optimistic as the company is worth $195billion (£97.5 billion). It is trading on about 40 times this year's likely earnings per share and that multiple falls to a still-high 30 times next year. The company is valued at nine times next year's revenues.

Google makes its money selling adverts alongside search results on its own and on other people's websites, and in the third quarter it raked in about $3billion (£1.5 billion) of revenue, more than 60% up on last year. (source: Independent)

A while ago, EBay reported that they have paid too much for internet phone firm Skype and that proved right as they reported a quarterly loss of $936 million (£459 million). The online auction site confirmed that this month they would have to take a $900 million (£450 million) charge due to overvaluing Skype, which it bought for $2.6 billion (£1.3 billion) in 2005.

Putting that aside, eBay's results still beat market targets as its revenues for the three months to 30 September soared, with third quarter revenues up 30% from a year earlier to $1.89billion (£945 million). EBay president and chief executive Meg Whitman said “it was the first time the company had reported a loss since the second quarter of 1999. However, the steps we took and moving to new management was completely the right thing to do," (source: BBC News)

A few months after budget airline came under scrutiny for not displaying the actual cost of flights and misleading people, budget airline Ryanair has again been accused of misleading claims by the Advertising Standards Authority (ASA). The claim came as a national advert by the airline read "Robbed by", stating that people buying tickets via an online agent were being "ripped off".

The ASA said the advert, which implied online agents overcharged people 100%, could not run "in its current form". The airline has been forced to withdraw other adverts for breaching ASA rules, including claims over emission levels. The latter mentioned case came after website indicated that Ryanair's advert, depicting a burglar described as an "online agent", denigrated and discredited their business.

The ASA upheld's objection that the comparison was misleading, because it quoted prices that were only available to people in the Irish Republic. The ASA also upheld another complaint against Ryanair by Lastminute after the airline said “the site did not supply terms and conditions and failed to notify customers of changes, neither of which were true”. In August, Ryanair was banned from saying its flight from London to Brussels was quicker and cheaper than the same trip by Eurostar. It emerged that the airline had not included the time or cost it took to travel to Stansted in the figure. (source: BBC News)

In measures to create a shake up in this lucrative market (as shown by Delta and Air France), British Airways (BA) is looking at merger opportunities that could create a transatlantic super-carrier. Aviation sources believe that BA is in talks with Sir Michael Bishop, controlling shareholder of bmi, to buy the British carrier. There are also talks that BA is considering a renewed attempt to merge with American Airlines, despite two previous approaches being struck down by competition regulators.

Delta, which is based in Atlanta, and Air France-KLM announced yesterday that they would merge their transatlantic operations to cut costs, due to the liberalisation of air travel between the United States and Europe next March. Under the new rules any airline will be allowed to fly anywhere, ending decades of bilateral restrictions that limited access to favoured carriers.

As part of the deal, Delta will get three of Air France’s Heathrow slots to offer new services to New York and Atlanta. The Delta-Air France deal will initially cover 19 flights a day from the US to London and France and will then be extended to all European destinations. In response, BA is thought to want to strengthen its already dominant position at Heathrow and is looking at bmi and American Airlines as partners.

Sir Michael Bishop has said “I am considering options for my 51% stake in bmi and is widely expected to sell within the next year.” BA would have to convince competition authorities that the takeover posed no threat, as the combined company would control more than half of all Heathrow flights. If BA were then to merge with American Airlines it would control about 66% of the Heathrow to US trade with the opportunity to offer many more flights. It would also have access to an extensive regional network in North America.

Steve Ridgway, chief executive of Virgin Atlantic, yesterday vowed to fight any attempt by BA to increase its dominance at Heathrow by creating a super-carrier. He said that such a deal would be bad for competition, bad for consumers and bad for the British economy. (source: Timesonline)

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