Investor disappointment in Google (GOOG) results misplaced, says Warwick Business School professor

While the market response to Google’s quarterly earnings seems to have been lukewarm, the stock price dipping in after-hours trading and at least six analysts lowering their price targets after the company came in slightly under Wall Street expectations, Warwick Business School Associate Professor John Baptista says that the modest performance is a ‘blip’.

Bapista, who has researched the company for many years, said that although Google’s ad revenues have suffered as traffic shifts from the desktop to mobile devices (something Google wasn’t slow to address), the real growth in the future will be in the cloud, with Google ideally placed to benefit … 

They have a solid business model that has been adversely affected by mobile adoption in terms of advertising revenue but what they offer is better than anything that Apple and Microsoft have available at the moment. So I think this is a blip in the long term performance of the company, and I don’t see how it reflects any major flaws in their strategy and product line.

The cloud and online services is where Apple and Microsoft are both heading, a place that Google knows better than anyone else. They know how to do that better than anybody else, more and more people will be moving to the cloud.

The main area of growth for Google will be Google Apps for Business, a cloud-based service. It is attacking Microsoft by offering small and medium businesses a very tempting package and at a cheaper rate. It has been around for a long time, but Google have improved it lately and it has 90 per cent of the features companies use.

It increasingly makes more sense for companies to use Google and I think this will be a growing market for them. Evidence of this is Microsoft launching Office 365, a cloud-based service for enterprises, so they recognise the threat of Google.

It’s a solid argument, and one Google bulls may eye with interest – though of course things can change rapidly in the tech sector. Microsoft initially did seem in danger of losing its domination of the business software market, but responded surprisingly quickly with Office 365. Apple, too, has started rolling out beta access to its iWork for iCloud service. Google’s head-start in the cloud arena is no guarantee of future dominance, and doesn’t always succeed even when it tries really hard to: witness Google+.

Google’s key strength may be its diversity. There are very few tech pies in which the company doesn’t have a finger, leaving the company free to ride the successful waves while letting go of the bets that don’t work out. And those successes tend to be big ones. Chrome, from a quirky alternative browser in 2008 to the world’s most popular browser today, with 750M users. Approaching a billion Android activations. Gmail the most popular mail platform in the world, with 425M users. A billion users on YouTube.

Crucially, the company has achieved something very few mega-corporations manage: remaining innovative despite becoming one of the largest companies in the world. From driverless cars to balloon-based Internet, there can be few companies of any significant size as willing to experiment with crazy ideas to see where they might end up. I frankly can’t imagine any other corporation – not even Apple – allowing any of its employees to spend one day a week working on a personal project of their own choosing. Both GMail and Google Maps were born in that 20 percent time. That, more than anything, is the reason I’d have confidence in the company’s continued growth.