
Google Passes Exxon to Become Second-Most Valuable U.S. Company - petethomas
http://www.bloomberg.com/news/2014-02-07/google-passes-exxon-to-become-second-most-valuable-u-s-company.html
======
martythemaniak
I know it sounds a little ridiculous, but I think Google still has a long way
to grow. I can easily see them as the first trillion dollar company and well
beyond that.

I think they understand the process of re-inventing themselves better than any
other tech company. They acquire a lot of companies, some of which continue to
grow and change the very nature of Google itself (example Android). They also
understand Black Swan Farming and practice it at a level (billions of dollars
at a time) that almost no one else does.

Andy Rubin's robotics undertaking is a good example. Page wrote him a billion+
dollar blank cheque and should it succeed, it'll make Google the leading
robotics company - likely alone worth as much as Google today. Should it fail,
well, it's only 2% of their cash pile. They've made similar bets on almost all
promising future tech - AI, clean energy, the internet of things etc.

~~~
Steko
Agree the sky is the limit for Google's future but there's always some risk
that FB or Baidu or someone could come in and take 80% of Google's users.

Aso by any reasonable measure Apple's market cap should be well over a
trillion. Take away their $165 billion cash pile from their $465 billion
market cap, give them 0% growth and you're left with the idea that Wall St's
expects Apple to be turning out the lights in 4 or 5 years depending on how
you value their IP, tangible assets and other investments. That's why Apple is
buying Apple stock like whoa.

~~~
guelo
That's the thing about Apple, they have $165 billion but they have no idea
what to do with it. The only R&D they seem to be able to think of is how to
make their consumer boxes shinier. No moonshots, no diversification. That's
why Wall Street doesn't see any huge upside.

~~~
wlesieutre
Says someone with no more insight than the rest of us on what's going on
internally at Apple. Recent hires and job postings suggest that they're
angling for the wearable electronics market, and I would bet they'll be years
ahead of the Pebble of Galaxy Gear when they do announce something.

Would people prefer that they be like Google, with piles and piles of R&D
projects that go public, get users, and are shorty abandoned? Ask me how long
Google has been working on MMS support in Google Voice for. I honestly wish
they'd never bought Grand Central, at least it would have improved in the last
several years.

~~~
jmathai

      I honestly wish they'd never bought Grand Central, 
      at least it would have improved in the last several years.
    

Or more likely Grand Central would have been acquired by someone else or shut
down.

I was a Grand Central user and while Google Voice hasn't lived up to all my
hopes and dreams it's a pretty kick-ass service.

~~~
wlesieutre
I suppose part of my problem is that I'm using it on iOS. Still no iOS 7
update, and there are some really braindead interface decisions in the client.

My personal favorite: Text conversations get new messages from the bottom. But
when you open the app, it doesn't automatically load new messages. How do you
get them? Pull to refresh. At the _top_ of the conversation.

Yup, scroll up past several pages of messages to get to the start, pull to
refresh, then go back down to read the new texts. Brilliant.

------
throwaway_yy2Di
Yet it's so _small_ :

    
    
                    XOM ('12) GOOG ('13)
        Revenue     $453 B/a  $60 B/a
        Profit      $45 B/a   $13 B/a
        Market cap  $393 B    $394 B
    

[https://en.wikipedia.org/wiki/Google](https://en.wikipedia.org/wiki/Google)

[https://en.wikipedia.org/wiki/ExxonMobil](https://en.wikipedia.org/wiki/ExxonMobil)

(101 for anyone who doesn't know this: revenue is how much you sell, profit is
what's left over for shareholders, market cap is how much shareholders think
that profit stream is worth).

Relevant: check out wikipedia's rankings of company size:

[https://en.wikipedia.org/wiki/List_of_largest_companies_by_r...](https://en.wikipedia.org/wiki/List_of_largest_companies_by_revenue)
(and the _see also_ )

~~~
milkshakes
You're neglecting growth:
[https://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&...](https://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=maximized&chdeh=0&chfdeh=0&chdet=1391806800000&chddm=981801&chls=IntervalBasedLine&cmpto=NASDAQ:GOOG&cmptdms=0&q=NYSE:XOM&ntsp=0&ei=U0b1Usi0OuOtiAKvkgE)

~~~
scoofy
This is a reasonable thing to point out. When valuing equities, i tend to use
a strategy out of the playbook of a less famous fund manager, John Neff. That
is, one that includes total return.

Indicator: Neff Ratio = (EPS growth rate + dividend yield)/PE

This is similar to the inverse of PEG, a much more common indicator, but it
includes yield as part of total return. It's one of my primary screens when
looking for equities, because both Exxon and Google would have good marks,
even though their return would be from different sources.

------
brudgers
Whoopdee shit.

If Exxon and Google were both liquidated today which one would produce more
cash? Google share prices reflect a speculator's premium. Exxon's better
reflect the value of the underlying assets.

~~~
3pt14159
Exxon is sitting on a resource that will soon be replaced with a more
efficient one: electricity. It is much, much, much cheaper to produce
electricity in coal or nuclear plants and charge cars to run on the road than
it is to refine gasoline and pump it into cars.

Google is sitting on top of the most amount of information ever collected by
any profit-seeking organization ever.

Skate where the pucks going man.

~~~
bradleysmith
This is a very cut-and-dry explanation that sells Exxon's future value (and
our reliance on petroleum products) way short.

Production of electricity is more efficient than production and refinement of
fossil fuels. BUT, Expenditure and distribution of that energy as electricity
is less efficient for use as a transportation fuel (as I understand it;
correct me if I'm wrong!). This is particularly true for heavy-load
transportation like 18-wheelers and industrial applications. Until battery and
electric motor technology improves to provide more torque for longer periods
of time, fossil fuel will be responsible for moving our STUFF around via
diesel motors. The moving of that STUFF still represents the majority of our
transportation fuel burned.

Exxon is also a very large investor in electric vehicle battery tech, which
will be one of the key technologies to change our transportation reliance from
fossil to renewable.

Also don't forget about plastics as a petroleum product; I think it will be
some time before we replace plastics as a common building material.

Granted, Exxon only spends ~3% of their profits on research of any sort, which
is probably less than their advertising budget, and they spend less in a year
on R&D than Google does in a quarter.

I don't really mean to start an argument, and I do hear your point. Exxon is
the leader in a dying business. Still, Exxon isn't _ignoring_ the puck.
They're probably as aware as anyone where the short-comings of fossil fuel
transportation start and stop, and they are as interested as anyone in
technology that will upend that industry.

~~~
3pt14159
It is more efficient to generate power in a power plant, transmit the energy,
then drive a car with it.

This is especially true when you take into account cheaper electricity at
night, and regenerative breaking.

The expensive part right now is the upfront cost of lightweight batteries, and
the small economics of scale.

But battery technology is continuously improving, so is economics of scale,
and electricity production from non-fossil fuel sources.

I'm not saying Exxon is dead, I'm just saying that it is insane to ignore what
is right in front of us. If gasoline doubles in price once more (in real
terms) then the internal combustion engine is over.

------
frogpelt
I have to say I don't understand companies that have very little in the way of
tangible assets being valued higher than companies that have mounds of
tangible assets.

For instance, Exxon-Mobil has $347 billion in tangible assets while most of
Google's value comes from its brain trust and the vision of its leadership.
The same could be said of Apple though they do have $40 billion in cash.

In other words, if both companies were offered to you at half of their current
valuations and you didn't know how to run either company, Exxon-Mobil would be
worth many times more to you just from being able to liquidate the assets.

I realize the market cap is based on more than that but I guess I'm wondering
why tangible assets don't play an even bigger role in valuations.

EDIT: AAPL doesn't have as much cash as I thought.

~~~
brudgers
If Google disappeared this weekend, we'd wake up Monday morning and our
Android phones would still work, a few people would miss Play and the worst
part would be listening to people complain about Bing search and everyone
else's maps.

If Exxon disappeared I'd be in line at the pump filling up gas cans in
addition to the tank and on my way to stockpile canned goods, potable water.
and buckshot.

~~~
prayag
This is exactly how we should value companies. Depending on the chaos it would
cause if they disappeared tomorrow.

~~~
jfoks
With your reasoning, for example, the private prison companies would be valued
incorrectly high (as do the companies that make the green lights for traffic
intersections, the doors to stores, the electric power company, the
wireless/phone/cable company, any company with any kind of monopoly, etc).
What you're forgetting is to weigh for the difficulty to replace the company
with another (that in some cases may already exist and only needs to move into
the now vacant market).

~~~
prayag
I was being sarcastic. It's really hard to do that on the internet.

------
Oculus
Undoubtedly, people will soon scream 'Bubble!', but I believe this is part of
the inevitable shift of technology becoming the driver of the world's economy.

~~~
JumpCrisscross
Google's value vis-à-vis Exxon reflects Google having a lightly regulated _de
facto_ monopoly on search in most internet connected countries, while Exxon is
in a fragmented, heavily regulated industry. Technology becoming the driver of
the world economy would involve it (<10%) [1] passing industry (31%) [2] in
its contribution to GDP.

[1]
[http://www.econstats.com/wdi/wdiv_533.htm](http://www.econstats.com/wdi/wdiv_533.htm)

[2] [https://www.cia.gov/library/publications/the-world-
factbook/...](https://www.cia.gov/library/publications/the-world-
factbook/fields/2012.html)

~~~
raldi
Wikipedia lists the characteristics of a monopoly here:

[http://en.wikipedia.org/wiki/Monopoly#Characteristics](http://en.wikipedia.org/wiki/Monopoly#Characteristics)

Which of those characteristics do you see in Google?

~~~
JumpCrisscross
Single seller - Google commands 2/3 of search engine volume [1] and 1/3 of
online advertising [2]. Yes, they have competition, but in several verticals
they are the only practical choice. Note that this does not make them an
_abusive_ monopoly, which is what those characteristics seem to be describing
more than a monopoly _per se_.

[1] [http://searchenginewatch.com/article/2289560/Googles-
Search-...](http://searchenginewatch.com/article/2289560/Googles-Search-
Market-Share-Shoots-Back-to-67)

[2] [http://www.bloomberg.com/news/2013-06-13/google-is-
projected...](http://www.bloomberg.com/news/2013-06-13/google-is-projected-to-
expand-lead-in-online-ad-market.html)

~~~
raldi
In which verticals is Google the only practical choice?

~~~
ForHackernews
Search engine marketing, for one.

~~~
raldi
But not search, like the original comment claimed?

------
matznerd
I prefer to live in a world where tech companies are our highest valued, not
oil companies.

~~~
saryant
The tech companies would not exist for very long without those oil companies.

~~~
valtih1978
The oil does not go into gadgets. All the oil goes into your car,
[http://www.youtube.com/watch?v=rPS1y81b1Bw](http://www.youtube.com/watch?v=rPS1y81b1Bw)

~~~
saryant
We would not live in our current modern age without oil. Moreover, the oil
companies _are_ tech companies and have been since before the phrase was
coined. What do you think Exxon's R&D budget is for? Exxon has over 1,000 PhDs
on staff.

Also, when you refine oil, not everything that comes out is gasoline. Those
byproducts are a major component of consumer electronics (plastics). The
entirety of a barrel of oil most certainly does not wind up in a car.

~~~
valtih1978
> We would not live in our current modern age without oil

really? Do you mean that I am an idiot who does not undestand this?

> Exxon has over 1,000 PhDs on staff.

Really? Can I prove that 1+1 = 3 based on that?

------
psbp
Can someone explain to me why the market is being so bubbly about google (yes,
pun intended)? I'm just not seeing over $1000 being the long, even for google.

~~~
encoderer
They're sitting on a huge pile of cash. Back that out and look at their
forward P/E. It's reasonable.

There is no reason Google shouldn't be over $1k. Except that 4 digit numbers
feel big. Which is probably one reason they're doing a split.

------
_zen
The thing I wish to see them focus on the most is making Google Fiber
everywhere. I wish they would take their ISP division more seriously.

~~~
winslow
Considering Kansas launched in September 2012 [1] that gives them a year and a
half of service. They've already announced Austin and Utah (Utah starting
service soon ~Feb 20 [2]). They are having to build new infrastructure to the
"fiber hoods" which takes a lot of capital and time. Let alone massive
political fights from the current ISPs that are sure to take months of time.
I'm not sure how they could be more serious about it?

[1] -
[http://en.wikipedia.org/wiki/Google_Fiber](http://en.wikipedia.org/wiki/Google_Fiber)
[2] -
[https://fiber.google.com/cities/provo/](https://fiber.google.com/cities/provo/)

------
gress
Pure speculation, given that Google hasn't launched a single successful
product* since their IPO.

*giving things away for free doesn't mean they are a success

~~~
wutbrodo
Play is expected to be a $3.2 billion a year business in 2014. Where do you
set the bar for "a successful product"? $5B/yr? Also I'm not sure if you're
also excluding acquisitions from your arbitrary definition, but all the
DoubleClick products (DFA/DFP/AdX) were post-IPO and are not even close to the
same product as AdSense. Don't mistake "I don't understand what I'm talking
about" with "anything that has the letters 'ad' in it must be the same
product".

~~~
gress
Ok - but accepting this perspective, all validated growth has been growth in
advertising. Does the P/E ratio reflect expectations for the further growth of
the ad business, or is it speculation that Google can be successful in
creating another type of business for which there is no antecedent?

------
dmead
is it still a good idea to buy google stock?

~~~
lutusp
To answer your general question:

[http://arachnoid.com/equities_myths](http://arachnoid.com/equities_myths)

But specifically, by the time a company is widely regarded as successful,
noteworthy, at the top of its game, the train has left the station. By
contrast, Warren Buffett would invest in a "company" consisting of a couple of
guys in a garage with a vision for the future.

~~~
chollida1
> By contrast, Warren Buffett would invest in a "company" consisting of a
> couple of guys in a garage with a vision for the future.

I think you meant would NOT invest in that scenario. Warren invests in

\- companies with strong reoccurring revenues

\- strong moats around them to protect them from competitors

\- companies that are the number one or two in their chosen fields

two guys in a garage with a vision of the future is sadly missing all of these
things. That's a very unlikely scenario for Warren Buffet to invest in.

~~~
lutusp
Buffett is best known for investing in companies that are undervalued. If he
simply invested as you describe, he would be lost in a crowd of investors who
use the same criteria.

Also it's important to say that some investors are going to succeed by chance,
not design, and there cannot be a consistent winning equities investment
formula or method. More here:

[http://arachnoid.com/equities_myths](http://arachnoid.com/equities_myths)

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michaelochurch
It'd be #1 inside of a year if it implemented open allocation.

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return0
Highest valued == Most Valuable ?

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ck2
Yes but Exxon doesn't pay taxes.

 _Exxon’s filings with the Securities and Exchange Commission, says the
corporation didn’t pay any federal income tax in 2009_

So Google was always more valuable to the US.

