Quote:
Originally posted by alf
and today Goog dropped $20 to $480, it should realistically be about $250 or so.
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I'm wondering if GOOG should be more like $2.50.
There is something very wrong with their balance sheet -- specifically their accounts receivables number. It currently stands at approximately a billion dollars.
At first glance, looking at their overall revenue numbers you wouldn't think it represents any problem, but if you start doing calculations, considering their billing system and what they've told us about their customer base, the number just doesn't make sense. I'm beginning to wonder if there is some sort of "sloppy" accounting (maybe fraud?) going on and receivables is being used as a "dump" to keep certain losses from being realized and affecting earnings negatively?
In brief:
Google has a system where most (from their SEC filings it would be about 90%) of their revenue is from small advertisers. These advertisers have to pay Google with a credit card. At no time, more than $500 is owed to Google from any individual small advertiser -- for starting advertisers, that number is less than $500, but for the established ones, their credit cards are charged when the advertising used reaches $500.
Last year's class action suit against Google gave us the information that Google has had a total of about 400,000 advertisers. Even if we assumed that all of these 400,000 advertisers are still advertising with Google and all of them were running a maximum outstanding balance with Google of $500, we still just get a number of $250 million in receivables.
Even if we add the probable amounts outstanding from the "big" (approximately 10% as described in Google's SEC filings) advertisers, I still can't see a receivables number that should be any larger than about $450 million (and that is being extremely biased in favor of a larger number).
As I see it, there is at least $500-$600 million in the receivables number that just can't be "justified" knowing what I understand about Google's billing system and customer base.
Additionally, when we have competitors like Yahoo talking about how soft the advertising market is, yet Google keeps reporting record earnings, I start having WorldCom flashbacks!
And of course there is the $8+ billion of insider sales of stock!
Maybe we won't see $2.50, but some sort of massive write-down on receivables and a huge crash in the stock price wouldn't surprise me.