Google’s Chrome & Android Are Undervalued: Morgan Stanley

Google’s Chrome & Android Are Undervalued: Morgan Stanley
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Google Inc (NASDAQ:GOOG) holds two of the most powerful weapons in tech industry, in form of its browser interface, Chrome, and Operating Software Android, Morgan Stanley (NYSE:MS) has revealed. While Google Inc (NASDAQ:GOOG) may not necessarily be the leading gadget seller, it has done incredibly well in providing the operating system acceptable by many smartphone and tablet makers.

Additionally, its browser interface, Chrome, which has since overtaken Microsoft Corporation (NASDAQ:MSFT)’s Internet Explorer, in terms of market share, has helped reduce amount paid to PC OEMs. Morgan Stanley (NYSE:MS) research analysts claim that these two components are highly undervalued, which implicitly means, their impact on the success of company, as well as its future, is not well captured in the pricing model of the Google Inc (NASDAQ:GOOG) stock.

Android O.S

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Google's Chrome & Android Are Undervalued: Morgan Stanley

The Android O.S has been installed in nearly 550 million devices globally, as compared to Apple Inc. (NASDAQ:AAPL)’s figure of just under 270 million, which happens to be Android’s main challenger. This indicates that superiority of the OS, which held a market share of just 2% five years ago. Illustratively, Google’s Android is expected to record a market share of about 60% by the end of 2012, as compared to Apple’s 20%.

Android’s market share has been rising steadily, and hence the current projection, which, if mapped to the trend has a high probability of being met.  Additionally, Android also appears to be taking advantage of those switching from feature phones to smartphones, with the biggest blow being received by Nokia Corporation (NYSE:NOK), which has adopted Windows as its major O.S for its smart devices.

The report also notes that Android now represents 64% of global device sales, as compared to its 2010 share of just 10%, thereby translating to an overwhelming 600%+ growth in less than 2 years. The O.S is not just helping the tech giant in terms of the number of sales it generates.  The following benefits of Android to Google were highlighted in the research report by Morgan Stanley:

  • Preventing a single entity, whether a device manufacturer, OS provider, carrier, or other business, from consolidating the mobile ecosystem.
  • Securing Google’s P&L against potentially onerous demands from a dominant smartphone manufacturer, or from carriers
  • Accelerating the development of connected mobile devices to prioritize larger screens and faster data connections, for easier access to Google’s advertising-supported services

These are hidden benefits that a majority of the people leave out when assessing the future of Google Inc (NASDAQ:GOOG). In the long term, these could prove very crucial in cementing the search engine giant’s core business, besides venturing into gadget production.


Google Inc (NASDAQ:GOOG)’s internet browser, Chrome has come of age, after surpassing Microsoft Corporation (NASDAQ:MSFT)’s Internet Explorer as the world wide leading browser.  Just like Android O.S, the browser has been gaining market share from competitors gradually, globally, apart from North Americe, the only region,in which it seems to be struggling to forge a larger market share.

The browser is largely gaining the mark in Asia, followed closely by Europe and the rest of the world, excluding North America. As of August, it held a market share of approximately 35%, just above Internet Explorer at 34%. Nonetheless, the largest positive can be derived from the ability prevent default toolbar placements by OEMs, which otherwise results in unnecessary costs to the search engine giant.

Statistics indicate that Google Chrome lags behind Internet Explorer in North America, with only 25% market share as compared to IE’s 41%, but commands market share in other regions, by leading in Europe with 31% as compared to IE, which is pegged at 27%.  Additionally, Chrome commands a 39% market share in Asia, as compared to IE at 32%.

This trend promises to continue further in the coming years, while IE shows signs of a continued fall, as illustrated in the chart above.

At the time of this writing, Google Inc (NASDAQ:GOOG) was trading at $724.29, up $6.01 per share, or a 0.84% increase from yesterday’s close.

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