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It's Official: Google Today Is Just Where Microsoft Was in 1999

  Eric Jackson,      2012-04-17 06:55:41      2,439    1    0

Google (GOOG) looks a lot more vulnerable to the accusation that it’s become the new Microsoft (MSFT) today compared to even a year ago.

Several people have said that Google’s co-founders, Larry Page and Sergey Brin, have sought to build their company so that it wouldn’t make the mistakes that Microsoft did in the 1990s.

Well, surprise, Google today seems a heck of a lot similar to where Microsoft was right in 1999 – the year after Google was founded.

Want proof? Here are 7 similarities:

1. They have the same number of employees as Microsoft did in 1999. Google just announced its headcount is now over 32,000.  Microsoft’s headcount in mid-1999 was 31,000.  Of course, Microsoft’s headcount has only exploded since then and is now at 90,000.  Despite Google’s much ballyhooed “20% blue sky time” for dreaming up new R&D projects, Google has always had difficulty bringing new entrepreneurial products to market even when it was much smaller.  It will be increasingly difficult and more bureaucratic now.

2. Anti-trust fears. Google is under governmental pressures around its dominant share in search today just as Microsoft was distracted by fears of its Windows platform dominance back then.

3. Small ankle-biter competitors in plain sight. Microsoft’s future competitors were in plain view in 1999, but a fraction of their size today.  Google itself was founded in 1998.  Apple (AAPL) was still trying to sort itself out with Steve Jobs’ return to the company.  How big will Facebook (FB) grow to be in the next 10 years versus Google?  

4. Google has about the same annual net income today that Microsoft did in 1999. Google shows no sign of slowing down its revenue and profit growth – just as Microsoft didn’t.  Google has done $38 billion in revenue in the last 12 months and $10 billion in net income.  Microsoft did $20 billion in revenues in 1999 and $7.8 billion in net income.  In the last year, Microsoft is up to $72 billion in annual revenue and $23.5 billion.

5. However, unfortunately for Google, future revenue growth doesn’t equal future stock growth. What can Google shareholders expect in the next 13 years?  Of course, if Microsoft’s stock chart is a perfect guide (and it isn’t), Google’s stock is heading for a 27% decline in the years ahead.  While that’s silly to expect that to a precise degree as circumstances are still vastly different between the company, that directional bet is probably correct.  Heck, Google’s stock has already been flat for the last 5 years, so investors are clearly worried about future growth prospects.  

6. Microsoft hadn’t yet paid a dividend then, just like Google but both had too much cash to be able to reinvest. Microsoft didn’t start paying a dividend until 2003.  We might have to wait 4 more years for Google to do so as well.  But Google today has nearly triple the cash that Microsoft did in 1999: $49 billion versus $17 billion.  A dividend is likely coming sooner than anyone expects for Google.
7. The Google co-founders are 38 today. Bill Gates and Steve Ballmer were 43 in 1999.  I’m sure that the Google co-founders like to think of themselves as young and hip.  However, compared to Mark Zuckerberg and Kevin Systrom of Instragram, Page and Brin are dinosaurs.  Anyone can see the flecks of gray in Larry’s hair in the last year.  That’s not to say old guys can’t innovate in tech.  Look at Steve Jobs.  However, Page and Brin are older guys with a lot of bureaucracy and path dependence surrounding them – just as “evil” Microsoft was.

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