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No, this is a fairly common criticism of public companies: stock markets don't like conglomerates, they value them at a discount [0]. It gives less power to sto
by est31 6y ago
No, this is a fairly common criticism of public companies: stock markets don't like conglomerates, they value them at a discount [0]. It gives less power to stock holders. Investors should be able to decide whether they want to keep their position in a browser company or a mobile phone OS company instead of Google managers deciding it.
Instead of having one highly profitable company focused on ads that pays out excellent dividends, Google leadership chose to spend it on lots of expensive employees instead.
A good counter argument to this is that if Google didn't do it, then a significant portion of their valuation would vanish due to the issue that in technology, companies which can't transition to newer revenue models perish as technology evolves.
So personally I don't agree with the criticism, but I think it's legitimate.
[0]: https://www.investopedia.com/terms/c/conglomeratediscount.asp https://www.investopedia.com/terms/c/conglomeratediscount.as...
- blackoil 6y agoIt also doesn't values the leverage owning complete ecosystem gives the company. If Apple decides to split iPhone, iOS, iPad, AppStore, Music/Content in different companies the value will be much lower than of a company together. Total>Σ(parts)
- beambot 6y agoI'm confused by the conglomeration argument... even beyond the innovator's dilemma aspect. The conglomerate market cap may be less than the sum of its parts at any given instant, but that completely discounts the strategic interplay between subsidiaries that results in substantially larger growth prospects & marketshare capture. This isn't universally true -- e.g. GE Healthcare & GE Aviation probably have very little overlapping strategic benefit. However, Google Adwords, Adsense, YouTube, Gmail ads, etc all benefit from common infrastructure & distribution. Or in the case of Berkshire, the ability to gobble up new investments relies on the tax-advantaged leverage of the insurance float.