Thursday, July 21, 2005



My portfolio gained about $4,500 today. Google's earnings report was good, but not as googly googly good as many traders were expecting. Actually, I though the numbers were strong. Depending on how you splice the data, they beat the analysts' earnings consensus by about 10 cents and blew away revenue estimates. I decided to play it safe and covered at $285.50.

However, I continue to maintain my view that Google is overvalued. This view stems not from the company's near term earnings momentum, which I think remains very strong, but rather by the company's long term prospects. Unlike EBay and Mircosoft, Google does not benefit from network effects. Thus, the company is vulnerable to competitors who may in the future create a superior product (remember Altavista and Webcrawler... how about Lycos and Excite?).

I also think that over the next few years, Microsoft will work feverishly to integrate search into Internet Explorer, and Google could suffer the same fate as Netscape. But all is not lost for Google longs. With a valuation in excess of $80 billion, there's still time for Google to buy Time Warner....

Holy moly.. that's a really sweet gain for today and this week. Good call on Google. I expected it to run up like last quarter.
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