Stock To Watch – Google
Mar 21, 2010 Stock to watch, Uncategorized
Shares of Google (GGOG) might come under pressure this week, if rumors that the company will announce on Monday that it is pulling out of the Chinese market, turn out to be true. If on the other hand, the company announces that it has reached a compromise with the Chinese government, the shares might rally.
Google as with all other internet companies, is required to censor the content that Chinese consumers access through its platform. This results in blocked content for those users. For instance, searchers in China searching Google for “Fulan Gong” a Buddhist/Taoist based religious group that the Chinese government deems a cult, or Tibet, which China invaded in 1950 and has occupied since or the Dalai Lama, the Tibetans’ spiritual leader, will come up short and their search results will not return any non-Chinese government sponsored sites on those matters.
With the potential profit potential of operating in the world’s largest country a motivating force, Google has willingly operated in China under the Chinese government’s censorship guidelines. However, in January, Google found out that the Google email accounts of some Chinese dissidents had been compromised via very sophisticated techniques, which led Google to conclude that the Chinese government was behind the attacks. The company has since been in a public war of words with the Chinese government, while in the background, the company is holding talks to see if a compromise can be reached. Needless to say, the Chinese government is not about to allow any internet company, especially a foreign one, provide fully unfettered access to global internet content to its citizens. As a dictatorship, you have to wonder about and be paranoid about what your citizens might do if they if they got too much information.
Google shares are right at support levels at $560 and on one hand, one would look for a trading move to $560 or even better if Google announces it is staying in China. On the other hand, the overall market is overbought and Google has this possible pullout out of the Chinese markets acting as a negative overhang on the shares. As such, a near-term downside move is a strong possibility.
Tags: google
