Recent developments with Microsoft attack on Google's "cavalier" approach to copyright protection" highlighted more deep and structural problems to the core of Google's Business. In a simple interpretation all this story with copyright issues is similar to open next to Nike Shop a Warehouse with cheap illegal copycats from Asia. "It will be very good for advertisement of your business" is very weak argument against criminal case. It is plain illegal and will kill Nike Shop. "Companies (Google S.) that create no content of their own, and make money solely on the backs of other people's content, are raking in billions through advertising revenue and IPOs," says Rubin, who oversees copyright and trade secret law at Microsoft." Here Microsoft is right and actually is rising the issue which could save trillions of Dollars to struggling US economy. Even more, until this "too liberal", criminal in nature approach is allowed (I think nobody cares so far and do not understand far reaching complications) it is killing USA economy and eroding the last resource of defence - Intellectual Property Rights. If you are not aware USA was the Driving force from 70s for constructing "IP" infrastructure and Patent and Copyright Protection. It was clear then that industrial wars will be lost to Countries with cheap labor and loose environmental policies. The only place to be for Developed World is in High End of Value Chain products depending on Technological Advances and "IP" protection. Whole industries blossomed on this concept and Google is assaulting one of the last pillars of US Economy. Take out Hollywood, Music, MSFT, Oracle, Cisco and nothing will be to Export from this country! US Dollar will seize to Exist. Will we have Congressional Hearing about it I am not sure, but what happen to Steel makers and Manufacturing we all know now. Google is in structural crisis to its business model, which is build around "open space" WEB and with "open sources" - available to others Technology delivering Similar Customer Satisfaction. It is not unique in plane English - Search is Commodity, as Buffet would put it (in a bad sense of this world) and Competitor is just click away or even in the same application like with Vista. Google was able to build Franchise because for a while its technology was better or perceived to be better by customers. But now Google is feeling the hit: for its Business it needs clicks on ADs, for this it needs Traffic which started to fall diverted to New More Content Interesting Places where customer can easily satisfy his Search need without getting out to Google. Contrary to Yahoo! which is Media Company and creating its own content Google's buying YouTube for 1.6 billion was desperate move trying to capitalise its Franchise further on "borrowed for nothing" others' content, they new it will be a lot of Capex and the monetising model was not in place, but they can not imaging that Copyright issue will put YouTube on the spot immediately. With economy falling in Recession (I do not buy the spin about "blip" in the Bull Market this Reaction is the last chance to get out of Tech) advertising will be cut First. Now Google will feel the pressure on all fronts: Growth of Revenue is falling and will fall further due to Yahoo! and others competition, Capex and costs are rising, payment for content on YouTube will add to cost structure and monetising is still not clear and everybody who is depending on IP rights will be waging war against it. Margins will be squeezed further and Free cash Flow will fall below 2006 level opening Pandora's box of Unsustainable Valuation with slowing growth, earnings without Tax Manipulation will be lower in Q1 2007 and will follow by Crash in stock price. Investors finally with the help of SEC will open their eyes to reality but it could be too late again. Today's Upgrade of UBS which leaked yesterday was done exactly at the low channel support line of Google DownTrend it is no more then act Of Mercy of God to those who did not sell yet, all these "strange" coincidence including perfect match of maximum pain on Options Expiration days will have its time in Court one day. Regarding UBS, they happen to have lending value for Tenke mining from 0.9 CAD up to 5.0 CAD and then "suddenly" found that it is too risky: lot of people lost their Tenke mining shares in Margin calls and somebody got them for cheap. Should I remind you that TNK.to today is above 16.0 CAD? UBS had Strong buy on ENRON and Worldcom as well, good luck following and welcome to 2001 again. Step out of the woods and look around: maybe you are missing something - it could be your money.
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