3 Unlikely Companies Google Should Buy
Karen is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Apple (NASDAQ: AAPL) might have more cash, but Google (NASDAQ: GOOG) loves to shop. And one thing Google loves to buy is companies that bring new products and services to further enhance their web presence. Each of the following three companies has the potential to increase Google+ membership numbers, generate new profits and attract more web traffic.
Avid Technologies (NASDAQ: AVID) is a video editing company that features an easy to use layout suitable for schools and students but still sophisticated enough for independent filmmakers. Apple recognized this market when it bought Final Cut several years ago and developed the company to where it had 54% of the video editing market, well above rivals Avid and Adobe. Final Cut was used to make television shows and movies, including “True Grit” and “Eat Pray Love”. Then, in June 2011 and for reasons no one will ever quite understand, Apple killed Final Cut and replaced it with its own shoddy version, the most recent being Final Cut Pro X.
Buying Avid Technologies would allow Google to tap into the void left by Apple. Students, schools and independent movie editors haven’t gone away – they still need low-cost professional video editing software. Avid has a low market cap of $261.19 million that makes it an attractive buy and Google could easily retool the software and the company if such changes were needed. Through clever marketing, Google could regain the market share Apple threw away and potentially attract new Google+ members.
At first blush pairing Netflix (NASDAQ: NFLX) with Google seems as practical as putting lace on a bowling ball. But Google’s acquisition of Netflix would add a customer base of over 25 million members and hand Google an incredibly large library of online movies, documentaries and other shows.
Netflix is currently facing a multitude of problems including customers unhappy with recent rate increases and the company’s inability to successfully negotiate a rental window with Walt Disney. The rental window is the time between when a DVD goes on sale and the time Netflix must wait before it can rent them out. Netflix will now have to buy Disney movies on the open market if it wants to offer them to their subscribers.
Netflix has a market cap of $3.49 billion, making it far more expensive than Avid. But if the acquisition was successful, Google would have a ready-made customer base that could be targeted for Google+ membership, thereby cutting into Facebook’s lead. In addition, Netflix fees would also substantially increase Google’s bottom line.
With the unveiling of Google+, the company is looking to quickly build its membership base. Open Table (NASDAQ: OPEN) allows customers to make online restaurant reservations in North America, the United Kingdom, Germany and Japan. The company makes money by charging restaurants who want to join Open Table an initial startup fee and after that, a monthly subscription fee.
Open Table needs to make up for its recent lackluster stock performance since the departure of its CEO. With the company’s stock price down and having a market cap of $986.22 million, Google may want to take a good look at acquiring Open Table.
Along with the income Google would receive through restaurant fees, Open Table could potentially add to the Google+ membership base and help close the Facebook gap. Well placed ads promoting Android could be aimed at Open Table and Google maps users.
The strategic acquisition of Avid, Netflix and/or Open Table would help Google further their market presence at the expense of rivals Apple and Facebook. With falling stock prices making these companies even more attractive, Google may decide the time is right to go shopping.
Fool blogger Karen Rogers does not own shares in any of the companies mentioned in this entry. The Motley Fool owns shares of Apple, Google, and Netflix and has the following options: short OCT 2012 $40.00 calls on OpenTable and long OCT 2012 $40.00 puts on OpenTable. Motley Fool newsletter services recommend Apple, Google, Netflix, and OpenTable. 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. If you have questions about this post or the Fool’s blog network, click here for information.