Silicon Valley Tumbling Into Recession

the glass half full part of the story is that we will see some "survival of the fittest." All these start ups based on single widgets or yet another social networking idea without a prayer to be monetized will be appropriately killed.

And then we will see Google at 200, firing people and getting more adult supervision and behavior. You heard it here first!

Wow, that's even more negative on Google's stock than I am! Would be quite the buying opportunity, though.

OK. I admit I have not done detailed math to justify 200 vs 250 or even 300. But I have done back of the envelope, and there is no way the stock is worth 450.

Here is the fundamental problem at GOOG: success. They have a truly distinctive tech platform. And they created a new market (search ads) with again a truly innovative search algorithm and business model (adware and adsense). Fine. No, not fine, great! They built a 15b or so business with very high margins. Then they proceed to hire 16000 smart people and develop a gazillion applications and services, and spend billions in acquisitions that are REALLY REALLY cool and smart, but create no shareholder value. In fact they destroy value since there is only a cost side and not revenues. Take Android. Of the 3Bn or so handsets sold wwdie in the next 3 years, how many will ship with Android. And how much revenue will they generate? Are the hype and the investment justified from a shareholders perspective? I guess not. This is true for most (all?) of the inveswtments. How do they justify 1.6 bn for youtube? I think youtube is really cool, and if the answer is that they needed to take bets to see what pans put, then fine, I will ask, which of the bets has paid off in a way that makes a difference for a 15bn company? None. Zero (incremental to the search advertising business).

Finally, there is the culture of the place. With few exceptions, Googlers are a bunch of arrogant kids with very little business experience and savvy (and most without accomplishments since they joined after the original business was well on track), playing around protected by the high margin of the business, so that their value destroying activities is not transparent to the market. It reminds me of AT&T in the late 80s. THAT is a funny comparison. Google = Ma Bell of Silicon Valley.

It's smell like... Web 2.0 bubble!