Standard & Poor's gives Google the U.S. debt treatment

Re:Standard & Poor's gives Google the U.S. debt treatment by wtvanhest on Tuesday August 16, 2011 @11:55PM (#2894015)

Margin differences between industries are obvious to a Sell-side/buy-side analysts. The analyst in this case talks about the difference in margins like a lower overall margin for google would be bad.

It won't be bad because Google will now have additional revenue (&profit) at that low margin and will be operating 2 different businesses. If anything is scary about this transaction it is the integration risk. Lower overall margins are not an issue for valuation.

This particular sell-side analyst may be using a model which does not value the company in 2 pieces which will give him a lower valuation than it should.

Google's new valuation should look like this:

Google's business prior to acquisition + Motorola's valuation + additional gains or losses from integration/synergies = Google's new valuation.

*also note that in finance valuations, the lower standard deviation of returns, the lower the risk premium so having Motorola may actually increase the valuation. On the other hand those buyers of google who wanted pure play search/cloud exposure may sell off google's shares.

[ Parent | on HN ]

Re:Standard & Poor's gives Google the U.S. debt treatment by rjd on Wednesday August 17, 2011 @12:52AM (#2894151)

I read the whole thing buy out as extremely ominous. The size of motorola mobility (if I read it correctly) was larger than Google. It has the potential to destroy Google from a logistical stand point, tie it up in so much red tape that it can't survive... or worse becomes a lame duck like Microsoft is now.

Profit margins aside its extremely hard to join to companies together. Infact one of my friends from childhood is an HR consultant who specialises is assisting business merge.

You wouldn't believe the crap he's told me, lets say fraud is generally everyones first order of business. If its like at any other company the people at motorola aren't going to be very happy with this new position and will try and take its parent company for all its worth before moving to a better position.

I assume Google is going to start issuing commands and maybe merging or forcing joint teams with the R&D departments, thats going to make things very difficult at motorolas end. Productivity is going to decrease as communication issues arise. People at motorola will probably get annoyed at being dictated to, always being wrong for misunderstanding directives, and want to move on (like I said above will take Google for all they can while they do it). Theres a serious chance they will view Google as an ivory tower issuing commands whilst being out of touch of reality. Loyalty will plummet.

Google is in for pain. Serious HR pain. A company that hasn't got a good record of dealing with things like that. Thats going to cost A LOT of money to work through.

[ Parent | on HN ]

Re:Standard & Poor's gives Google the U.S. debt treatment by X-Istence on Wednesday August 17, 2011 @04:03AM (#2894526)

Motorola Mobility is estimated at around 20,000 people. Google is at 29,000 people. So just a little bit smaller.

[ Parent | on HN ]