At $1,000, Google highlights a tech divide

Oct 20 2013, 04:49 IST
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SummaryGoogle has done something few companies ever do in the stock market: it has joined the $1,000 club.

Google has done something few companies ever do in the stock market: it has joined the $1,000 club.

On Friday, Google’s share price jumped above that price for the first time, another milestone in its remarkable ascent from $85 in its public offering in 2004.

On one level, $1,000 is just a number. But on another, it is a reminder of the new order that has taken hold in the technology world in just a few short years — and how far apart the winners are from the losers.

Google closed up 14 percent on Friday, at $1,011.41, after a better-than-expected earnings release late Thursday. The jump brought its gain since its initial offering to roughly 1,100 per cent.

By comparison, the overall Nasdaq composite rose 120 per cent, while Microsoft gained just 28 per cent. “Companies away from Google and Apple and a few others increasingly have trouble communicating a value proposition” to shareholders, said Martin Reynolds, an analyst with Gartner. “Only few big companies are starting to matter.”

These new leaders have focused on Web-based businesses. While the big money in technology used to be in selling to businesses, today’s leaders are oriented toward consumers. Friday’s gain made Google, already one of the world’s most valuable companies, one of the few in which buying a single share costs more than $1,000. Others include, the online-travel company, and Seaboard, which processes turkeys and hogs.

In some ways, Google’s investors are betting that quantity can beat quality. Google’s challenge has been lower prices for the ads it puts on its own and others’ Web pages. Much of the traditional market for these ads has been saturated, and Google has been trying to put more ads on mobile devices. Mobile ads tend to make less money since people click on them less often.

Much of the growth in mobile was initially in the developed world, where ad prices are generally higher. As the use of smartphones and tablets spreads into developing economies, the revenue per user is likely to drop, affecting overall profits unless Google can grow even faster in these markets.

For the third consecutive quarter, 55 per cent of Google’s revenue came from overseas sources. Google finished the quarter with $56 billion in cash, held in the US and overseas.

Another bright spot was sales to businesses of Google Apps. This revenue was $1.23 billion, an increase of 85 per cent from the third quarter of

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