Google: The Death Of The Internet

At the end of the 1968 film "The Swimmer", Burt Lancaster remarks "Look at that Sun, all the heat’s gone out of it."

The Internet is cooling considerably.

Mary Meeker of Morgan Stanley remarked at Google’s (GOOG) earnings that the company came up a little shy on EBITDA. And, its come to that. Profits can triple at Google, but the company now grows at only 19% sequentially, and that is not enough. The days of doubling revenue are now behind the big search company.

According to the Associated Press, American Technology Research analyst Rob Sanderson said Google’s profit wasn’t quite as impressive as it appeared because the company enjoyed an unusually low tax rate of 24 percent. And it has come to that. Google, picked apart on issues of EBITDA and tax rates.

The stock lost $8 after hours, and Wall St. now has to wonder if it can reclaim the $500 a share level.

AOL’s (TWX) ad revenue grew 49% last quarter. Ebay (EBAY) said its revenue will grow about 20% in 2007. Yahoo!’s (YHOO) growth is slowing, but would still be the envy of most companies.

Where does that leave Wall St. and the Internet?

Over that last year, the Nasdaq has outperformed Yahoo!, Ebay, and Amazon (AMZN). Google continues to out-pace the Index, up 25% in the last year against the Nasdaq at a little over 5%. Investors would have been better off in GM (GM)  And, going back two years, Google is up 160% to the Nasdaq’s 20%. That kind of premium performance may well be over.

Some time a things speaks for itself. The drop in Google’s stock after its earnings announcement and the slowing in its premium performance over the Nasdaq says volumes. This may no longer be traded as a growth stock.

Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.