May 31, 2006

During an investment conference call this week, the top management at Google told Wall Street it expected to diversify into different markets such as print advertising.

Google also stated it will continue to hire additional workers in the San Francisco Bay area where it is located. On the other hand, the company ruled out any interest whatsover in designing a new Internet browser that would directly compete with Microsoft's Internet Explorer, or any other Web browser for that matter.

Shares of Google quickly went into negative territory after the conference call began.

As a public company, Google has often been criticized for not offering investment analysts enough guidance about its financial affairs and immediate plans for the future.

Google's stock is down about 10% so far this year, after increasing more than 115 percent in 2005. However, Wall Street investors had little reason to be concerned about the company's fundamentals. The company reported much higher results for its first quarter.

Sales at Google were higher by 79% and net earnings increased by about 60% from 2005. Offering selected advertising based on specific search terms is the company's core competency and, generally speaking, Internet advertising is very healthy and growing rapidly.

Additionally, Google has gained market share from its competitors for the month of April 2006. But Google, which refuses to offer the investment community any sales or any earnings guidance has been extremely tight-lipped about any of its corporate strategy.

To make matters worse, the company has even made some high-profile public relations mistakes in 2006 that have raised concerns of many investors. Google missed 4th quarter net earnings forecasts by a wide margin in January, the company's 1st earnings disappointment since its first IPO almost two years ago. Google blamed all of that on a higher tax rate that really surprised every analyst on the Street.

Adding fuel to the fire, in March of this year, the company disclosed in a regulatory filing with the SEC that it mistakenly put up slides detailing out-of-date financial targets during its analyst day Web cast!

In addition to all of this, some investors are worried about whether increased competition from Yahoo, Microsoft (MSN) and Ask.com could seriously harm Google's growth prospects.

On May 24, Yahoo announced a broader alliance with Internet auction provider eBay, an initiative that many industry observers interpreted as a way for both companies to more effectively fight Google.

Also, some people think the company needs to do more to diversify beyond its search-based advertising roots in order to avoid what some have termed it a "one-trick pony".

Google's CEO Eric Schmidt said during the conference call that the company was trying to diversify into other areas of the Internet advertising segment, including helping companies place targeted advertising in print publications like magazines and newspapers.

However, Schmidt was quick to point out that Google would probably not be immediately successful in such new ventures. "Some people forget, even inside our own company, that the business model that has been working so well for us today took a few years to get right," he said.

What's more, Jonathan Rosenberg, Google's senior v.p. of product management, added during the call that the company is also experimenting with different ways to make money with its fairly new video search product.

Lately, Google came under fire for what many have considered aggressive capital spending plans.

The company said that it expected to spend more on real estate, as it continues to hire more workers in Silicon Valley. The company is headquarted in Mountain View, Calif.

At the end of the conference call, Eric Schmidt said it was highly unlikely that Google would use any of its approximately $8 billion in cash to make any major acquisition in order to expand its global market share.

Schmidt said that instead of mergers or acquisitions, the company was more interested in partnering with other companies in order to boost its own traffic.

Recently, Google has made deals to have some of its software installed on personal computers made by Dell, and some handheld messaging devices manufactured by Nokia.

Source: CNN Money