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Ballmer Says Google's Growth Is 'Insane'
Posted by
Zonk
on Fri Mar 16, 2007 09:39 AM
from the doubling-the-doubled-growth-rate dept.
from the doubling-the-doubled-growth-rate dept.
eldavojohn writes "Steve Ballmer spoke to the Seattle PI this week, commenting that Google's pace of employee growth is 'insane,' and the company has few successful businesses outside of Internet search and advertising. He referred to Google's non-search efforts as 'cute.' Google's current number of employees is nearly doubling each year. 'I don't really know that anybody's proven that a random collection of people doing their own thing actually creates value.' Mr. Ballmer went on complain that, in general, competition for good programmers has become an issue. Even 'hedge funds' are looking for skilled coders, making the HR fight between the two companies that much more challenging."
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Microsoft's Ballmer: Google Reads Your Mail 264 comments
Anonymous writes "A piece of video has emerged in which Microsoft CEO Steve Ballmer says of Google, 'they read your mail and we don't.' Evidently, it was part of a lengthy discussion on the future of the software business model, and whether advertising could support free consumer software. Ballmer said it doesn't work, at least when it comes to email. '"That's just a factual statement, not even to be pejorative. The theory was if we read your mail, if somebody read your mail, they would know what to talk to you about. It's not working out as brilliantly as the concept was laid out." Ballmer isn't the first to fire salvos at Google's Gmail privacy policy. Privacy advocates have been critical over the policy almost since the beginning, but the popularity of the service has skyrocketed nonetheless.'"
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Let the chair throwing commence (Score:5, Insightful)
ROaaarrrr!!!! We are finding ourselves *hoot hoot* having to spend more money to hire quality programmers *scratch*. *Beats Chest* Google BAD!
Re:Let the chair throwing commence (Score:4, Funny)
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Insane (Score:5, Funny)
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Re:Insane (Score:5, Insightful)
Balmer: "I don't really know that anybody's proven that a random collection of people doing their own thing actually creates value."
Microsoft's Arno Edlemann: "Usually Microsoft doesn't develop products, we buy products."
It's pretty clear that MS doesn't really understand what "Innovation" really is, and how to do it. In the long term, this will bite them in the ass. Continuing their abusive and illegal behavior to maintain their de facto monopoly is their only hope of long-term survival, and they know it.
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Re:Let the chair throwing commence (Score:4, Funny)
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Re:Meh... (Score:4, Funny)
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Slasdotters Say Ballmer Is 'Insane' (Score:5, Insightful)
Ok, joking aside, am I the only one who finds Balmer's complaint a bit hypocritical? It's true that Microsoft has incredible sums of cash. However, Windows and Office are pretty much the only things making Microsoft that cash. Nearly every other portion of the company either contributes very little to the bottom line, or actually loses Microsoft money. I imagine that's part of the reason why Microsoft keeps bundling extra software services with Windows: At least it raises the value of the software package. (In theory, anyway.)
That being said, I am going to (*gasp*) agree with him on one point. Having a bunch of programmers sitting around does not accomplish anything. They have to be in a full-on creative environment to do the truly impressive stuff. I think that the environment is slowly dissolving as Google loses it cohesion as a tight-knit company. They're growing incredibly fast, and I'm not sure they're really getting a good return on that growth. Obviously, only those inside the company can actually know that for sure, but it's not looking as good as it once did for those of us on the outside.
Re:Slasdotters Say Ballmer Is 'Insane' (Score:5, Insightful)
I do agree with you that their rate of growth is not sustainable, but I also suspect that as soon as it slows, people will immediately go "Google's hiring is down! Are they in trouble? Are they just not good enough to stand up to Microsoft after all?"
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Re:Slasdotters Say Ballmer Is 'Insane' (Score:5, Insightful)
From their about google page:
l4hParent
Re:Slasdotters Say Ballmer Is 'Insane' (Score:5, Insightful)
Yes. And that one thing is sell advertisements. Just like magazines. Only instead of editorials, infographics, and stories, Google uses search and nifty Web and network enabled apps to attract eyeballs.
Google's army of coders building "cute" apps are no different than a magazine's editorial staff and contirubuting writers writing targeted content that some demographic enjoys reading. Google's coders are just building content to bring viewers to the site.
Now, Google may bring all the world's information together, but that's only because it happens to help sell advertisements. If people stopped becoming interested in information, Google would look for other ways to attract viewers. Like...er...buying YouTube...
Google's business model an excellent model for developers. Using advertising to pay for developer's projects is really a holy grail for developers. You don't have to build the perfect product or meet external specs. You just need to build something cool and have fun doing it. And, you get to share it without of the traditional software strings attached. Very cool model.
-Chris
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Re:Slasdotters Say Ballmer Is 'Insane' (Score:5, Insightful)
Another interesting thing about Google's model is that, compared to traditional Madison Street advertising companies, most of Google's revenues come from small to medium-sized businesses. They've levelled the playing field when it comes to buying advertising space, allowing a mom-and-pop shop to compete directly with a mega-conglomerate. What I find most interesting about this model is that I believe it to be fairly immune to business cycles. While large companies will expand and contract their advertising budgets based upon their bottom line, Google will receive relatively constant business from the mom-and-pop shops, whose advertising budget is both small and fairly constant regardless of recessions or expansions. We'll have to see how Google does through the next recession, since during the last recession they were still growing market share far faster than the economy was contracting. My bet is that Google becomes a safe haven for investors during recessions as a result.
Finally, despite Google's phenomenally high P-E ratio, Google is currently fairly well valued, at least according to Free Cash Flow models. According to my research (and please don't take my word for it, do your own research--the results I found were startling to say the least), the FCF model was the only model that was significantly better than a random walk in predicting company valuations. Google has a high P-E ratio not because it is overvalued. They have a high P-E ratio because they have fantastic (and improving!) profit margins and revenue growth. Can it continue? Well, past performance is certainly no guarantee of future performance, but based on what I perceive to be a business model with a clear and sustainable competitive advantage, and a relatively non-existant connection to recession/exapnsion, I believe they will be able to sustain strong revenue growth and stable or improving profit margins for the next 3 years at the least. Plug in those assumptions to a FCF model, and you'll find that GOOG is fairly valued, if not undervalued.
That's my 1.5 cents (inflation is a bitch).
-dan
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Re:Slasdotters Say Ballmer Is 'Insane' (Score:5, Insightful)
The voting power in Google stock is very narrowly held, and deliberately so because the founders wanted to go public without giving effective control of the company to outside investors.
With a company thats direction is narrowly controlled by a small group, you can't assume that everything is about financial profit as much as you can with a widely held company.
One might just as well argue that Google sells ads, because that's the only way to bring in the money to bring the world's information together.
Of course, the reality probably combines both: Google's leadership is probably interested both in profit and bringing information together, and has found a way to have the two reinforce each other.
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Re:Slasdotters Say Ballmer Is 'Insane' (Score:5, Insightful)
Either Ballmer's an idiot or in denial. I'm feeling it's a little from column A and a little from column B.
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Re:Slasdotters Say Ballmer Is 'Insane' (Score:4, Informative)
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Re:Slasdotters Say Ballmer Is 'Insane' (Score:5, Insightful)
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Re:Slasdotters Say Ballmer Is 'Insane' (Score:5, Interesting)
What we're hopefully seeing here with Google is a company that can face up to and outperform Microsoft and continue to do so while Microsoft burns through money trying to put them out of business. Then end of Microsoft's ability to do whatever it wants and put down whoever it wants would be a great boon to the world of computing.
The slow uptake of XP and the potential even slower uptake of Vista only feed into the process. Truly we are living in interesting times.
Rich
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Re:Slasdotters Say Ballmer Is 'Insane' (Score:5, Insightful)
They do make a fair amount of money through their ad system but they are yet to produce anything else which isn't running at a loss. Besides, most stock-market analysts will agree that unless Google can pull something out of their hat in the next few years, their valuation is simply insane.
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Re:Slasdotters Say Ballmer Is 'Insane' (Score:5, Funny)
I like gmail, but it's bee 3 years since I started using it and its still "beta". I'm a bit concerned google isn't very committed to their products.
And let's face it - this isn't 1998. The google search model sucks these days, and only worked great for the first few years because no one was exploiting their pagerank methodology. I get the same crap on Microsoft's search engine I do on Google. It doesn't matter which one I use, and for the 90% of people who juse use IE's defaults, it doesn't matter to them either.
Google has been riding on their successes from nearly a decade ago. I think google is in a much more difficult place than you imagine. If anything, their hiring fanatacism is a desperate attempt to find a diamond in the pile of coal. They are hoping that of the hundreds of turkeys they hire, one will think of something big, and they will be saved.
I'd say if google doesn't come up with something real fast, like in the next 3-5 years - they will be finished.
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Re:Slasdotters Say Ballmer Is 'Insane' (Score:5, Insightful)
Remember this is MS. Everything is reverse in MS world. i.e. They are innovating when they copy other companies. The Apple phone doesn't offer any new features. Linux is full of their IP. And it goes on and on.
Well some of their divisions really do nothing for Windows. Like the Xbox. Its a huge money loser. It doesn't add to Windows or Office. Xbox is about taking the market from Sony and Nintendo. Period. When other companies lose $4 billion on a division or product over several years, the product gets cancelled or overhauled. What I mean by overhaul is in the strategy. MS did neither. It just followed the same strategy and upgraded the hardware and software specifications for the Xbox 360.
Yes but even if they are working, are they actually producing anything worthwhile? MS spends about $1 billion a quarter in R&D. Over the last five years, all they've managed to do is to produce an OS that in my opinion, a woeful copy of OS X. It's not that they don't have good people and that their people don't work. It's that the direction of the company is lacking.
To me, Microsoft's problem is that their main goal it to compete with anyone who might threaten their monopoly. Their goal is not to make a good product but to beat everyone else. IE was only innovative up until Netscape lost. Then development stagnated until Firefox became a threat. MSN Search was just an ordinary search engine. Then Google showed up. MSN Search was overhauled to compete. Apple conquered the MP3 player market. MS now wants a piece of that market.
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Re:Slasdotters Say Ballmer Is 'Insane' (Score:5, Interesting)
Something that is scary, though, is that Google has a very unique position in the marketplace. They know trends before they are public trends. With their stats program that is popular with startups, they can see new sites and new ideas before they get big. That is tremendous power, in both terms of capital (buying out early), and could be used for good of "evil" very easily. Imagine if they started selling that data to investment groups. "Based on search queries it looks like MSFT might face a major wave of backlash, you should short their stock." They are in position to even influence the global market through Google News and search results ranking.
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Re:Slasdotters Say Ballmer Is 'Insane' (Score:4, Informative)
Exactly. When was the last time Microsoft's stock was over $100, let alone $400? Ballmer's more envious than anything -- he keeps wondering why no one at Google is reading the résumés he keeps sending.
I don't think so. I think they're pushing the wall further and further, making things less profitable for their competitors. The extra ideas they come up with, good or not, aren't hedges against a collapse but part of a strategy to quietly worm their way into every part of the Internet. Face it: Google the search engine is near ubiquitous now. If they come up with other things (mobile phones, operating systems, etc.) that attain that kind of ubiquity, eventually they'll be able to charge for them and people won't give it a second though, since they will have become dependent on them.
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Re:Slasdotters Say Ballmer Is 'Insane' (Score:5, Informative)
No offense, but don't start investing.
A companies value is NOT reflected by the share price alone. It's the share price TIMES the number of outstanding shares.
Quick math:
Googles market cap is 137.43 billion; share price is 441.96; it has approximately 311 million shares circulating.
Microsofts market cap is 267.23 billion; share price is 27.31; it has appromately 9.7 billion shares circulating.
It's been argued that one of the main reasons that Google trades at such a high P/E ratio is because they've restricted the number of shares circulating... Like, if they split the stock to match the shares outstanding of other companies, there'd be so many shares circulating that the price would drop, not only just because there'd be more shares as a result of the splits, but because there would actually enough to fill the demand.
Not trully related to the discussion, but related to your comment...
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Re:Slasdotters Say Ballmer Is 'Insane' (Score:5, Interesting)
The problem for Microsoft is two-fold. Everything Microsoft does ties in to their core business. And that core business is under constant threat.
Everything Microsoft does points back to their OS. And in turn, their OS is the platform on which they build everything they do. The concept of lock-in is not only about immediate profit, but it also ensures that they have a clear path ahead of them. Its easier to see and plan for the future if you control the present. Anything that does not feed the need for a Microsoft OS stack is a threat to this strategy.
Why would Microsoft worry about losing control? Ask IBM what its like. Consider a time where IBM seized the microcomputer market - a time where "IBM PC" was a product reference and not a place-holder for a box produced by one of several thousand possible vendors with an unknown combination of commodity components. IBM is still a power-house in the Industry. But they no longer control it. It's hard to not only make money in a commodity market, but it's also hard to control one. And when you don't have that control, it is difficult to determine what directions such a market is going to take. What happened to hardware may very well come to pass for the OS as well.
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What happened to . . . (Score:4, Funny)
Jealous much? (Score:5, Funny)
If you really felt this way, you'd sit back and wait for Google to implode, and then hire all the best ex-google-ites for well under what they're being paid now.
But you're making such a fuss about it...whining really.
Steve here's a hint for you, it's called competition. Look it up some time.
Re:Jealous much? (Score:4, Insightful)
Why? What's wrong with their business model, why would it fail?
Nothing, but there is such a thing as an overvalued share price and Google is the textbook example. There are other shares that are worth even more than Google, Berkshire Hathaway comes to mind, but those companies tend to generate a lot of actual real cash value each year. If one discounts the advertising revenue, which is by all accounts meager compared with the current share prices, then it becomes extremely difficult to estimate how much the remaining value, including intellectual property, human capital, and experience may eventually be worth. It is not *zero* to be sure, but exactly how much and when? The answer to that question determines how much you are willing to pay for a share and how much you ultimately earn in that investment depends upon how accurate your initial estimation was. In the meantime your $400+ dollars per share are NOT earning money doing something else. It is a substantial risk and one that not every investor is necessarily willing to take. On, the other hand, "there is a sucker born every minute," or so the saying goes.
Their revenues are increasing, and search-related advertising is hardly going to disappear -- never mind their expansion into other types of advertising.
Yes, but see above for why this does not necessarily a good investment make...
As for rate of growth, define growth. You mean rate of employee growth? Sure, exponential growth is unsustainable. But with gross profits over 6 Bn on revenue over 10 Bn, I think they've got pockets deep enough to continue to hire freely -- never mind the cash reserves of 11 Bn.
I think that he meant employee growth, but even employee growth must be justified in terms of additional value created for the business. It does not matter if the company has a bankroll of $10 x 10^4 or $10 x 10^7 dollars. If the business cannot earn at least $1 plus prime interest rate or 10 year treasury rate (4.45% currently) then that dollar should be returned to the shareholders in dividends after all of the expenses have been paid. Reinvestment is not always a good idea, it depends upon the current economic climate and the potential returns. The fact that Google has 11 Bn cash reserves is immaterial to this point.
Think about it. If they pay $200,000 annually (incl benefits) for good employees, they can still hire 30,000 of those people while still turning a gross profit.
The company is generating money based upon advertising revenue and EXPECTED future revenues in the form of inflow of investor money, but this does not necessarily mean that each employee is generating a gross profit by their direct efforts.
Assuming, of course, that their revenues don't drop off, which would run counter to almost every analyst's predictions.
If you are an investor in Google right now, especially if you didn't get in real early (and who but the insiders did?), you had better hope that not only does revenue NOT drop off, but that growth doesn't slow either because you are going to need some pretty powerful revenue growth to come out ahead at $400+ per share on P/E ratio of 40+.
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Hedge funds (Score:5, Insightful)
Next week news: (Score:5, Funny)
Google is insane? (Score:5, Funny)
Re:Google is insane? (Score:5, Funny)
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He may have a point (Score:5, Insightful)
Throwing more resources at a problem isn't always the best way to solve it. For crying out loud, if anyone should know that it's Ballmer.
A business I worked at several years ago did the same thing. Grew too fast and outpaced the market. Wound up running out of cash and having to lay off all those new hires. One guy was an employee for two weeks. I helped interview the guy, too.
Microsoft jokes aside, (Score:5, Interesting)
Disclaimer: I worked for Microsoft
Google's approach to growth right now resembles something like a gold rush, assuming that they know where the gold really is. I dont think they do exactly, but are hedging their bets on a number of ideas. The search engine makes money, but Google knows that they will need to do more, and I hope the phone rumors are true, but even so, just gathering a lot of great programmers together under one unbrella does not guarantee innovation.
I think Microsoft proved that good programmers dont necessarily make great programs. Every one of Google's businesses are cases of doing someone else's idea better. Cant wait to see what is coming, but for the moment, I cant see the fault in Ballmer's logic.
Re:Microsoft jokes aside, (Score:5, Insightful)
To me, that sounds a *hell* of a lot better than doing someone else's ideas, but poorly, but having enough money and tenacity to wait out your failing competition.
Maybe that's just me, though.
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Re:Microsoft jokes aside, (Score:5, Informative)
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Re:Microsoft jokes aside, (Score:5, Insightful)
Microsoft Corporation is a multinational computer technology corporation with global annual revenue of US$44.28 billion and 76,000 employees in 102 countries.
Google Inc. had 10,674 full-time employees as of December 31, 2006, Revenue $10.604 Billion USD (2006)
Which company looks more bloated?
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Re:Google looks more bloated (Score:5, Informative)
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Re:Microsoft jokes aside, (Score:4, Interesting)
Businesses don't need to be innovative. They just need to keep money coming in. It doesn't really matter if you try to do one thing well or if you exploit your market position to get away with doing something barely good enough. In either situation, you get the money and that's all the business cares about. Doing something better than your competetor is good enough to bring the money in.
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Balmer hates Google, film at 11 (Score:5, Interesting)
rebuttal (Score:5, Insightful)
It doesn't sound like Mr. Balmer's been paying that close attention to the FOSS phenomenon. As far as I can tell a random bunch of people doing their own thing for the last 10-20 yrs have achieved just as much as traditional software business models, in some case more and in more profound & lasting ways.
Have some cheese with that whine (Score:4, Interesting)
Second, if Mr. Balmer is correct, and Google doesn't have a sound or sustainable business, then it really doesn't matter; in a few years Google will implode, and Microsoft can sweep up all the Google alumni it wants.
(Insane) Pot calling the kettle black? (Score:4, Funny)
Microsoft is now the old IBM (Score:5, Insightful)
I remember Bill Gates once saying that his worst fear for Microsoft was to become the next IBM - in other words, a big slow moving business with many levels of bureaucracy (this was some years ago and he was talking about the "old" IBM).
Well, it looks like Bills worst nightmare has come true, as evidenced by Ballmers comments. Google is now what Microsoft used to be - a lot of small teams working on their own projects without levels of bureaucracy interfering.
Straw Men (Score:5, Insightful)
Google is not a random collection. You don't need to prove anything. Ballmer is not the authority on the matter. They are not all doing their own thing.
This is a CEO?
Why does Steve Get Newstime? (Score:5, Funny)
Re:Why does Steve Get Newstime? (Score:4, Insightful)
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Ballmer's talking about Microsoft. (Score:4, Insightful)
Microsoft, 1980, one successful business, compilers and programming languages.
Microsoft, 1990, one successful product, operating systems. Their language business has become part of the support for their OS business.
Microsoft, 2000, finally have a really *solid* operating system for the first time since they dumped Xenix, and a handful of secondary businesses leveraged off their OS business.
It took Microsoft over 20 years to get to the point where they were more than a one-product company, and they're really not good at all where they can't use their position in the OS market to give people a magician's choice of products.
If google has a few successful businesses outside of Internet Search they're doing better than Ballmer did over the same period in the company's life cycle.
Robotic, cookie cutter hiring (Score:5, Insightful)
Google contacted me for an interview (I never applied). My phone interview with Google grilled me on undergraduate algorithms like graph traversal. Thats pretty much it. Now my undergraduate degree is actually Electrical Engineering, but my graduate research has been mostly software development. I'll admit I didn't remember details on many algorithms (never actually took an algorithms class), but I'm sure I could code up Diikstra's Algorithm once I read it over from a textbook.
Needless to say I was quickly rejected from Google. Why they contacted me for an interview and then tested me on things I have little background on, I have no idea. The interviewer even admitted to me that he actually doesn't use any of this stuff in his day-to-day job.
Thus I'm skeptical when these companies claim that they can't find people. They may have a hard time finding people that fit the exact cookie cutter they are looking for.
Interesting issue (Score:4, Insightful)
Re:In other news (Score:5, Funny)
So they have to sell one copy of Windows Vista to compensate. Big deal...
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Re:Time will tell. (Score:4, Interesting)
The reality is that anybody worth hiring is going to be curious about things, will have their own interests, and will have their own research projects on the side. The only decision an employer must make is whether such projects will be on the employee's own time and expense, or is it something the employer can support (i.e. related, even if only tangentially, to the business). It may, after all, turn out to be the Next Big Thing and make the employer a buttload of money.
To paraphrase a line from JAG, anybody who wants to mess around with things that badly should be messing around for us.
...laura who messes with Linux and GPS on company time, but who pays for her own telescopes
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