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Google Inc Financial Analysis

Google Inc Financial Analysis - Talk about Page and Brin...

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Google Company Analysis Prepared by Matthew Decuir for Finance 449 Under the advisement of Professor David Fewings, PhD Western Washington University, spring 2007
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1 Executive Summary Google's mission is to organize the world's information and make it universally accessible and useful. From the beginning, Google had a lofty goal, but as time has passed, Google has without a doubt shown its potential. Leading the search engine industry in market share, Google is one of the largest and fastest growing technology companies in the world. Driven by advertising revenues, Google has gained success by providing relevant search results while also offering advertisements which are related to the content of each specific web page. Additionally, Google offers a variety of free services and products, ranging from a myriad of free search services, to Google Maps, to services available for mobile phones. Because these services draw millions of users to Google’s websites every day, advertising revenues provide a steady stream of income. Google has posted significant growth rates over the past five years, resulting in a stock price of more than $500. While the market values Google’s stock at $504.77 as of June 12 th , predicted valuation based on free cash flows shows that it is slightly overvalued by less than 0.3%. Despite lofty predictions and great potential for the future, Google’s stock price should only be valued at $503.32, which is based on free cash flow estimates. This report may represent a conservative estimate, as Crystal Ball analysis shows that given specific assumptions, Google’s stock price could range from under $100, to more than $30,000 per share. Overall, Google has tremendous potential as a company, while constant innovation may prove to be the cornerstone of Google’s continued success in the future.
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2 Company Overview In the beginning, Google was nothing more than a research project developed by two Stanford graduate students. In 1996, Sergey Brin and Larry Page had developed a search engine with a unique method of ranking search results. As the need for a relevant search engine on the internet became clearer and clearer, Brin and Page registered the Google.com domain in 1997 and officially formed Google, Inc. on September 7, 1998. Google had an advantage over other search engines at the time because their search results were ranked in a relevant manner; based on the number of sites linking to each specific page. Because of the high quality search results and their simple approach to searching, Google’s popularity has grown substantially over time. Along with their growth in popularity, Google has grown to employ more than 10,000 people worldwide, while also being ranked as the best company to work for by Fortune Magazine. The term ‘google’ was derived from a misspelling of the word ‘googol,’ which refers to 10 100 , and the name stuck. Also, due to the popularity of the world ‘google,’ Merriam-Webster added the term to their dictionary defining google as “to use the Google search engine to obtain information on the Internet.”
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