After further consideration of GOOG’s plans announced yesterday to purchase Motorola Mobility (MMI 38, Hold), we see greater risk to the company and stock. We expect the transaction to be consummated next year, but later than early ’12, which GOOG indicated. Moreover, despite MMI’s extensive and valuable patent portfolio, we are not sure it will protect Android from IP issues. We also believe the purchase of MMI would negatively impact GOOG’s growth, margins and balance sheet. Based on revised DCF analysis, we are cutting our 12-month target price to $500 from $700.
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S&P downgrades Google
Standard & Poor has downgraded Google's stock rating from "buy" to "sell" over a lack of confidence in the Motorola Mobility acquisition.
You won't find 24/7 news coverage about this downgrade. But just as it did with the US government, Standard & Poor's has lowered its outlook for Google.
Well, maybe not "just."
As the Wall Street Journal's MarketBeat blog notes, it's an apples-and-oranges issue. While the S&P sovereign-debt group was responsible for downgrading the United States to the AA+ rating, it was the financial services firm's equity analysts who have now lowered Google's stock rating from "buy" to "sell."
It seems that S&P isn't at all confident about the Motorola Mobility acquisition, according to equity analyst Scott Kessler:
This goes a long way towards explaining why Google's stock price started to show a distinct downward motion before the closing bell today, August 16th.
Google's going to have to do something to reignite confidence in the Motorola Mobility deal, or else that slide will only continue - if we've learned anything here in the US these last few weeks, it's that when S&P talks, investors listen.