SWOT Analysis: Google

Callum is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

With a SWOT analysis investors can get an inside look into a company's long term prospects as well as problems it will have to deal with in the future. The SWOT analysis continues to be one of the best ways to dissect a company and get a good look at what you are really investing into.

Strengths

1. Google (NASDAQ: GOOG) controls 83.7% of the global desktop search market

2. Google controls 89% of the global mobile search market

3. Google has $45.72 billion in cash and only $3 billion in long term debt

4. Google's Android system accounted for 72.4% of all smartphone sales in Q3 2012 according to Gartner

5. The Samsung Galaxy S3 (which runs on Android) has been selling very well (outpaced the iPhone 4S in Q3) and many are saying that it is better than the iPhone

6. Vast app ecosystem with tons of apps and developers

7. The Nexus 7 got great reviews and is selling very well right now, eating into Apple's market share

8. US paid click traffic is up 27% year over year in Q3 2012

Weaknesses

1. It is Dependent on Microsoft's (NASDAQ: MSFT) operating system on desktops (which controls over 90% of the desktop OS market) for its desktop search engine, yet it competes with Microsoft in numerous different sectors

2. It Missed earnings expectations last quarter and saw its stock price fall

3. Gross Margin is coming down (65.29% TTM versus 59.76% in the latest quarter) as more searches come from developing countries where the revenue per click is lower than in developed nations

4. Google is losing map services market share (has fallen by 50% in China) as Apple continues to box out Google in this very lucrative industry

Opportunities

1. Total paid clicks continue to rise, with most of the growth coming from developing nations. Google's paid click traffic was up 28.8% in the US year over year (for Q3 2012)

2. Google is making a lot of headway into the tablet market

3. The smartphone market in the US isn't saturated yet and millions still need smartphones, many of which will come with Android's OS

4. Lots of cash means it can buy up strategic assets (like Twitter) to boost profits

5. S&P just raised Google's corporate credit rating to AA and it could rise higher

6. Google is pushing into the cable industry, starting up a fiber optic network in Kansas City

7. Location Based revenue is expected to grow from $2.8 billion in 2010 to $10.3 billion in 2015 according to Pyramid Research

Threats

1. Apple (NASDAQ: AAPL) is trying to box Google out of the fast growing location service industry

2. Microsoft is aggressively pushing into the smartphone and tablet industry with the launch of Windows 8

3. Bing is gaining some market share in the US search industry; going from 19.4% in Q4 2011 (Google had 80.6% of the market) to 21.3% in Q3 2012 (Google now has 78.7% of the market). Keep in mind this is just the US search market 

4. While this is a long shot, antitrust issues could ensue, especially if Google tries to push into the fiber optic industry with its dominance in the search market

5. The smartphone industry remains one of the most competitive markets in the world and you must always be on top of your game. One year of bad phone line ups and you could end up like Blackberry

6. Companies like Facebook and Twitter can take up a lot of internet viewing time, decreasing the chance that consumers search the web

Final Thoughts

Google is a very well-run company and continues to grow at a very rapid rate. The threats to Google remain limited while the opportunities are endless. This is a company that makes anything from search engines to driverless cars to fiber optic networks. The "cloud's" the limit for this great internet company. I'm bullish on Google in the long term, but one could make an argument that its stock price is a little high at current levels.


callumturcan owns shares of Microsoft. The Motley Fool owns shares of Apple, Google, and Microsoft. Motley Fool newsletter services recommend Apple, Google, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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