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Friday 21 March 2008

Losing wireless battle may be Google win

MICHAEL LIEDTKE
AP News

Mar 20, 2008 17:50 EST

Losing the battle for a prized piece of the airwaves isn't necessarily a setback for Google Inc.

If anything, Thursday's news that Verizon Wireless had won the government-run auction for a pivotal swath of spectrum may even have been the ideal outcome for Google.

That's because investors no longer have to fret about Google straying from its main business of Internet search to spend more than $10 billion buying and building a wireless network.

Yet Google still positioned itself to profit from the newly available airwaves by ensuring the bids for the so-called "C block" escalated to $4.6 billion. Reaching that price triggered a provision that requires the new wireless network to accommodate all mobile devices, including equipment using a software package called "Android" that is supposed to give Google a better opportunity to sell more advertising.

Verizon bid a total of $4.74 billion to win most of the C block, which Google hopes will make it easier for consumers to access its search engine and other products on "smart" phones and other mobile devices.

Google arguably would have been in an even better position in the mobile market if it controlled its own wireless network, especially one with the potential power the C block figures to offer. The 700 megahertz spectrum, to become available in February 2009, is expected to provide better wireless access because the frequencies travel long distances and easily penetrate walls.

But the time and money that would have had to be invested in the C block probably would have represented another millstone on Google's sagging market value, which has already plunged by $80 billion, or 37 percent, so far this year.

And any further erosion in Google's stock price would threaten to depress employee morale because virtually all of its nearly 17,000 workers own shares in the Mountain View-based company. Google shares gained $1.55 to finish Thursday at $433.55.

In a statement, Google congratulated Verizon and described the outcome as a consumer victory. "Consumers soon should begin enjoying new, Internet-like freedom to get the most out of their mobile phones and other wireless devices," wrote Google lawyers Richard Whitt and Joseph
Faber.

"Google has plenty of other things on its plate right now," said analyst Marianne Wolk of the Susquehanna Financial Group. "This (wireless network) would have been a 'nice-to-have," but it's certainly not a 'must have.'"

The stalled U.S. economy is a more pressing concern for Google right now.

With most key indicators pointing to a downturn in consumer spending, investors have become increasingly concerned that Google's once-torrid earnings growth will cool off as advertisers trim their budgets.

Google management also figures to have its hands full trying to blend in a recently acquired online ad service, DoubleClick Inc., that cost $3.2 billion — by far the biggest deal in the company's 9 1/2-year history.

Meanwhile, rival Microsoft Corp. is hoping to challenge Google's dominance of Internet search and advertising by buying Yahoo Inc. for more than $40 billion.

Although it's expected to become a gold mine eventually, the mobile advertising market remains relatively small at somewhere between $1 billion to $1.5 billion in the United States. Wolk predicts U.S spending on mobile ads will reach $3 billion by 2011. Last year, Google's U.S. revenue totaled $8.7 billion, with most of the money coming from ads viewed on computers.

This News from : http://www.mobile88.com
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Posted by: aroeltsm aroeltsm.blogspot.com, Updated at: 9:44 pm

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