Google Inc (NASDAQ:GOOGL) (NASDAQ:GOOG)’s acquisitive behavior is no secret. The company has made dozens of big splashy acquisitions in the past ten years. The company has also been very bold with new product launches. Though not all of its acquisitions and new product launch initiatives have panned out, the company deserves more credit than it gets, believe Barclays analysts Paul Vogel and Michael Urciuoli. Barclays has an Overweight rating on the stock with $650 price target.
Acquisitions have been key to Google’s tremendous success
Investors focus on big products that couldn’t take off as well as expected, such as Google+ and Google Wallet. But Vogel and Urciuoli believe that many of the company’s acquisitions and new products have been successful, and the company has an exceptional record in this area. With the search, Gmail, Android, Maps, YouTube, Fiber, Chromecast, Shopping, and Play, the company is everywhere consumers want to be.
In April, Li Lu and Bruce Greenwald took part in a discussion at the 13th Annual Columbia China Business Conference. The value investor and professor discussed multiple topics, including the value investing philosophy and the qualities Li looks for when evaluating potential investments. Q3 2021 hedge fund letters, conferences and more How Value Investing Has Read More
In fact, large acquisitions have been some of the biggest drivers of the Mountain View-based company’s success. Google acquired YouTube for $1.65 billion in 2005, which has turned out to be an immensely successful deal. YouTube is expected to generate $5.5 billion in revenues this year, and is growing at 35%-40% annual rate.
Android, which currently dominates 80% of global smartphone market, was also an acquisition. The company bought it for just $50 million in 2005. Today, Android has become the core of Google’s mobile strategy. Google announced at its I/O conference on June 25 that it is expanding Android to car, smartwaches, and TV. Android has also started powering laptops.
AdMob and DoubleClick helped strengthen Google’s advertising business
Analysts believe that the $3 billion purchase of DoubleClick in 2007 and $750 million acquisition of AdMob in 2009 were key to strengthening Google’s presence in online advertising. They helped Google become a leader in display and mobile advertising. However, its more recent acquisitions have been pricier. Google bought Motorola for a whopping $12.5 billion in 2011. But the company recently sold it to China’s Lenovo Group Limited (ADR) (OTCMKTS:LNVGY) (HKG:0992).
Earlier this year, Google acquired Nest Labs for $3 billion. Barclays believes that connectivity is coming everything and everywhere. So, Nest Labs puts Google in a strong position as the market evolves.