The Global Guru: Invest in the GE and Thomas Edison of the 21st Century

Nicholas Vardy

Nicholas Vardy has a unique background that has proven his knack for making money in different markets around the world.

Over the past decade, Google Inc. (GOOG) has become much more than the world’s favorite Internet search engine.

With its relentless ambition and capacity to deliver a flow of unexpected products, Google is rapidly emerging as the dominant consumer technology company of the early 21st century.

Today, Google is taking a pioneering role in everything from developing self-driving cars; releasing kooky augmented reality glasses; installing fiber cables in Kansas City; to financing renewable power deals in South Africa and Sweden.

Why Google is to the Internet What GE was to Electricity

Google has become the dominant player on the Internet in the early 21st century — so much so that a leading New York venture capitalist has accused Google of trying to control the Internet, “like Microsoft tried with personal computing.”

Yet, as the Financial Times recently pointed out, the best comparison for Google seems not to be Microsoft in the 1980s but General Electric (GE) in the late 19th century. After all, electricity disrupted industries as much as the Internet did. And both were bigger disruptors than Microsoft’s operating systems ever were.

Much like GE did over a century ago, Google rides the wave of cutting-edge technology, not only inventing products but also making a mint from them. And like GE, Google has many rivals. Yet the combination of both GE’s and Google’s inventiveness and commercial acumen set them apart from their rivals, allowing both of them to exploit new technology for many years to come.

Larry Page: An Improved Thomas Edison

Google’s new momentum coincides with Larry Page’s ascent as the undisputed leader of the company he founded 15 years ago at my alma mater, Stanford University, with Sergey Brin. Five years ago, Google was still run by the amiable cadre of “Google guys” — Larry Page, Sergey Brin and Eric Schmidt — as an informal mix of a company and research lab.

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But then Larry Page took the reins. Since then, he has made Google formidably and relentlessly focused.

Page started by extending Google’s search lead into mobile, through Android and Chrome software.

But search was just the start for Google. As its expansion into a remarkable range of activities confirms, Google is, as one analyst put it, “a massive machine learning project, and it’s been feeding the machine for a decade.”

With his relentless ambition to dominate the Internet, Larry Page is like a latter-day Thomas Edison — a commercial inventor marked by “the utterly fearless range of his experimental activities at Google.”

Ironically, as a kid, Page was obsessed by Nikola Tesla, the Serbian U.S. immigrant who worked for Edison and battled him over the adoption of DC or AC electricity in the United States. Page recalled how he read a biography of Tesla as a child and “cried at the end because I realized you can be the world’s greatest inventor and still be a failure.”

Both Tesla and Edison were equal parts inventor and showman. Yet, neither ever had the impact of Page. Edison lost control of GE when it was formed in a merger. Henry Ford called Edison “the world’s greatest inventor and the world’s worst businessman.” With his $20 billion personal fortune, Larry Page has already outdone Thomas Edison and Nikola Tesla on the business front. And Google is likely to outdo GE on the inventing front as well.

The Remarkable Range of Google’s Businesses

The sheer number of businesses Google is involved in borders on breathtaking.

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Search
More than 300 million people conduct over one billion searches on Google every day. And Google keeps tweaking this service in important ways. You can now talk to your Google homepage to bring up relevant search results.

Advertising
Google’s top 25 advertisers each are spending at least $150 million a year. Google-owned YouTube’s revenues alone doubled over the past year. Online advertising is the cash cow that allows Google to experiment with a wide range of other efforts.

Operating Systems and Platforms
Google Chrome OS is an open source operating system with the Google Chrome Web browser as its foundation. Google also helped develop the Android mobile software platform — the #1 rival to the dominance of the Apple iPhone.

Enterprise Services
Google Apps includes Gmail, Google Docs, Google Calendar and Google Site. Many governments and big customers across the globe now use Google’s Enterprise solutions — including 58% of the Fortune 500. The Department of the Interior is the largest federal agency using Google Apps.

Other Businesses
Two years ago, Google entered the fray against Facebook (FB) with the launch of Google+, which has attracted over 90 million members. In September 2011, the company acquired Zagat, the restaurant-rating agency. In December 2011, Google announced an investment in a portfolio of solar photovoltaic (PV) facilities serving the Sacramento Municipal Utility District (SMUD). In May 2012, Google Inc. acquired Motorola Mobility Holdings, Inc. (MMI). Google Fiber is a big and long-term bet by management, one that potentially can transform the company’s future and reshape the entire Internet. Google X, its “moonshot” research lab, is developing wearable computers and driverless cars. Google is even looking at automated cars parking more densely to reduce parking costs at its own offices.

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Individually, each of these non-core ventures has an uncertain future. But taken together, the potential of any single, unexpected breakout product could provide a huge revenue boost for Google and further extend its dominance over the Internet.

As Google co-founder Sergey Brin put it in Google’s May conference call, “The best way to predict the future is to make it.”

With Google trading at a forward price-to-earnings (P/E) ratio of 17.4, the stock is not cheap. But then again, it never has been. As a current recommendation in The Alpha Investor Letter, I recommended that my subscribers buy Google (GOOG) and place their stop at $825.

Disclosure: I own $900 December 2013 call options on Google.

To read my e-letter from last week, please click here. I also invite you to comment about my column in the space below.

P.S. Join me for the San Francisco Money Show, Aug. 15-17, at the San Francisco Marriott Marquis. There is no charge for this conference, but you do need to register. Call 1-800/970-4355, and mention code #031736.

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