Tuesday, May 02, 2006
The Reason Why Google Is Down: Big CAPEX
I read a great article called Capex Hits Big Techs by Cody Willard on TheStreet.com. He has a really good point and possible explanation to why Google is down - as is Microsoft. They are both really ramping up their spending on capital expenditure - hardware, infratructure buildings etc. And I remember that Eric Schmidt did point out in the Google Q1 statement that CAPEX would outgrow revenue for the rest of 2006. That of course reduces short term profit and can make some investors wary. However, I strongly believe that Google is investing in the right things and that these investments will pay of and keep Google ahead of the pack. Especially the idea of Google creating an alternative to the Internet is interesting. The more they grow (and they do a lot of that) the more reasonable the investment will be to them. If they can increase peoples use of Internet, they WILL increase their revenue. Its just a matter of time before the maths work out positively on this one and they will push ahead. Stay tuned for GoogleNet.