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

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 Pageand 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.

Read the full post in Forbes

Sphere: Related Content

Google's Paranoid Governance Structure Has Made It Less Innovative, Not More

Here's why the anti-shareholder governance structure of Google has led to a flat share price in the last 5 years and no "innovations" to show for it.

Read the Forbes post

Sphere: Related Content

Stop Bitching About Apple's Board

Why do we constantly hear complaints about Apple's board when Google's goes whistling past the graveyard? Seen their 5 year stock returns?

Read the full Forbes post

Sphere: Related Content

Dear Larry: A Letter From Wall Street

By Eric Jackson, Senior Contributor04/27/11 - 08:00 AM EDT

NEW YORK (TheStreet) --

Dear Larry:

What happened?

There was a time -- just before you IPO'ed in 2004 -- when we really thought Google(GOOG_) was a kooky company. You put that strange letter to shareholders in your S-1. You said you wouldn't pay attention to the short-term demands of Wall Street. You set up a dual-class share structure so that none of our activist hedge fund brothers could throw you out if you did a terrible job. You said you were going to be a different kind of company.

We don't like different. It's hard to figure out. It's random. Worst of all, it suggests your margins are going to suck.

Google CEO Larry Page

Luckily, Eric Schmidt won us over. He was very articulate, if not a little professorial. He seemed to listen to our concerns and communicate back to us in a way that conveyed understanding and serious intent. In short, we liked him and our confidence was bolstered by your results since IPO.

However, since you pushed Eric out so that you could retake the CEO title, we're a little freaked out.

All those early fears of ours about a bunch of kids running this company in some haphazard way came back to us. The day you made the announcement that you were taking over for Eric, you released a picture of you, Sergey and Eric sticking your heads out of a Prius that drives itself around the Google parking lot. Driverless cars? That's in the Google R&D budget?

More recently, we've read that you're investing in wind farms in Oregon. Hundreds of millions of dollars in wind farms. Your recent quarter's results showed operating expenses up 40% because you gave everybody one-time 10% pay hikes across the board.

In short, we're seeing lots of spending and it's not at all clear how this is going to benefit us -- the shareholders.

We know you call us Wall Street people and you look down on us. You think because we're not engineers or Rhodes Scholars that we're not as smart as you. You think we're slick guys in flashy suits who don't deserve what we're paid. You put us down in private -- until you need our money.

.......

[** This post is an excerpt of the full article, which is available on TheStreet.com by clicking here. Free Site.**]

Sphere: Related Content

How Things Will Shake Out for the Rest of Google’s Management Team

There's been lots of speculation about who's in and who's out at Google under Larry Page. I weigh in with my views.

Read my full post at Forbes.

Sphere: Related Content

A First Look at Larry Page's Google

By Eric Jackson
RealMoney Contributor
4/4/2011 1:00 PM EDT
Click here for more stories by Eric Jackson

Today is Larry Page's first day at Google (GOOG - commentary - Trade Now) as CEO, post Eric Schmidt's "adult supervision."

In my opinion, Larry has always wanted this job. He never wanted to cede control when they hired Schmidt, but he felt forced into it by his venture-capitalist investors. After all, back in 2001, when Schmidt was hired, 28-year-olds (which Page was back then) just didn't tell Kleiner Perkins to buzz off and that they were going to keep manning the ship. It took Facebook's Mark Zuckerberg to break that mold.

The question you are bound to hear repeated today and for the next few months is whether Larry Page is the next Steve Jobs (of Apple(AAPL - commentary - Trade Now)) or Jerry Yang (of Yahoo! (YHOO - commentary - Trade Now)).

My guess is that Page will have a rough go as CEO. He is probably underestimating the human, emotional and leadership aspects of being a CEO. And let's face it, he hasn't had many role models who are great bosses. Larry has had Eric Schmidt -- who of course was always highly deferential toward Page and Sergey Brin - plus his doctoral advisor at Stanford and his parents. That's rather limited.

Page has never had the amazing experience of having a real jerk as a boss. The kind of guy who drives you absolutely nuts, who you bitch about at the water cooler with colleagues, and about whom you mutter to your spouse or girlfriend at night: "If I ever get to be CEO of this company, I'm going to do the exact opposite of that guy." Conversely, he's never had a boss who's challenged him, brought out the best in him and held him accountable when he was slacking off.

And don't tell me, "Oh, Google is a different kind of company. It's like a college campus. The management team even sits around on beanbags in an open-air room in the middle of the campus at the same time every week where people can drop by on their scooter and ask questions of the top leaders." I used to drink wine until 2 a.m. at college and debate Kierkegaard and Nietzsche too. There were some brilliant peers who intellectually duked it out with me. But do you know what all of them taught me about being a leader of people? Absolutely zilch.

...

[*** This post is an excerpt of the full article, available by clicking here to go to RealMoney.com. Note: subscription required. ***]

Sphere: Related Content

Who's Running Google's China Strategy?

By Eric Jackson
RealMoney Contributor
3/21/2011 4:00 PM EDT
Click here for more stories by Eric Jackson

What is Google (GOOG - commentary - Trade Now) thinking in terms of its China strategy?

It was exactly a year ago, in March of 2010, that reports started circulating saying Google would leave China over hacker attacks and China's attempts to limit free speech on the Internet. A few weeks later, Google pulled its servers off the mainland and placed them in Hong Kong.

Looking at the 12 months since then, I would have to say that that decision was a complete failure.

Google's share of searches in China dropped to 27% last summer, down from 36% prior to the pull-out. The prime beneficiary has been China's top search engine, Baidu (BIDU - commentary -Trade Now), which saw its market share rise to 71% from 68% over the same period.

Google's share price has fallen 2% to $569 a share in that time. Meanwhile, Baidu's U.S.-traded shares have more than doubled, from just below $60 a share to $120.50 at the close Friday.

At the time of the pull-out from China, both of Google's co-founders, Sergey Brin and Larry Page, supported the move. Reading the psycho-social tea leaves, it appears that Brin was replaying the childhood trauma of his family fleeing the pre-Glasnost Soviet Union for America in pushing Google to leave China.

As Brin tells it in a recent interview at a TED conference, the decision to leave China was easy:

"We'll do as much as we can, but we don't want to run a service that's politically censored. We're not talking about porn and gambling, things like that, but really the political stuff. ... I want to find a way to really work within the Chinese system and provide more and better information. So, I think a lot of people think I'm naive, and that may well be true, but I wouldn't have started a search engine in 1998 if I wasn't naive in that way. ... Perhaps we won't succeed immediately, tomorrow or not, but we will in a year or two. ... Our focus has really been what's best for the Chinese people. It's not been about our particular revenue or profit or whatnot."

According to some reports, Google's decision to leave China led to some conflict between the co-founders and CEO Eric Schmidt. Though not the only reason, it is perhaps part of the reason why Larry Page decided to assert himself and take over the leadership of Google starting next month.

The recent action in Google's stock since that leadership announcement suggests that the market is still uneasy about Page's ascension and whether he will be a boost to the stock or an inexperienced and undisciplined leader.

...

[*** This post is an excerpt of the full article, available by clicking here to go to RealMoney.com. Note: subscription required. ***]

Sphere: Related Content

Video: The Power Behind Google's Throne: Shona Brown

Contributor Eric Jackson says watch for Google (GOOG) SVP of Business Operations, Shona Brown, to wield some major influence now that Larry Page is taking over as CEO from Eric Schmidt. Brown co-authored the 1998 book "Competing on the Edge" about how the ideal tech companies need a balance of entrepreneurial zeal with proper organizational structure.

Wed 01/26/11 08:30 AM EST -- Eric Jackson

Stocks in this video: GOOG

Sphere: Related Content

The Power Behind Google's Throne

By Eric Jackson, Senior Contributor01/26/11 - 06:00 AM EST

NEW YORK (TheStreet) - When I was a struggling Ph.D. student 10 years ago or so, my advisor was good friends with a revered professor of strategy and organization from Stanford: Kathy Eisenhardt.

Although Kathy's written countless academic articles on the subject and strategy and competing in ultra-fast industries, she's not a professor in the Business School at Stanford, but in the Department of Industrial Engineering and Engineering Management.

In 1998, she gave a talk at Columbia about a new book she co-authored with her doctoral student at the time. The book was called Competing on the Edge: Strategy as Structured Chaos. The co-author was Shona Brown. Today, Brown is the senior vice president of business operations atGoogle(GOOG_). And with last week's news that Larry Page would talk over running Google in April from Eric Schmidt, Shona Brown's importance at Google just increased significantly.

So, who is Shona Brown? Like most people at Google, she's brilliant by normal standards. The Canadian, who majored in computer science at college, was selected as a Rhodes Scholar. She decided that she wanted to work with Kathy Eisenhardt at Stanford in the mid-1990s and graduated with a Ph.D. in strategy and organization from the Engineering School.

At Stanford, with Einsenhardt who was well-known and well-regarded by tech companies in the Valley, she got involved in many interesting side consulting engagements. Instead of opting for the academic path after graduation, she decided to pursue consulting. She went on to be a management consultant at McKinsey & Company in Toronto, where she worked with Patrick Pichette, who -- like her -- was also a Rhodes Scholar and was working at McKinsey at the time Brown joined. He would later go on to become an executive at Canada's largest phonecompany, Bell Canada.

At McKinsey, Brown began working with Google and its senior executives and founders on the ideas discussed in her book. To boil the book down, the co-authors discuss how companies, especially tech companies, seem to do better when they strike the right balance between organizational structure (clear roles/processes) and entrepreneurial dynamism (e.g., reacting to some instant news in the market or environment instead of being too bureaucratic to react).

.......

[** This post is an excerpt of the full article, which is available on TheStreet.com by clicking here. Free Site.**]

Sphere: Related Content

Video: Larry Page's Zuckerberg Envy Not Good for Google

Contributor Eric Jackson says Larry Page pushed out Eric Schmidt as Google CEO because of Mark Zuckerberg envy. Zuckerberg defied conventional wisdom and remained CEO instead of steeping aside for someone with gray hair. Page, who senses Google is falling behind, thinks he can recharge the company. There's a lot of risk for investors with this unknown quantity at the top. Eric owns AAPL.

Tue 01/25/11 10:00 AM EST -- Eric Jackson

Stocks in this video: GOOG | AAPL

Sphere: Related Content

Turning the Page at Google

By Eric Jackson
RealMoney Contributor
1/24/2011 5:04 PM EST
Click here for more stories by Eric Jackson

My first reaction to the news on Thursday that Google (GOOG - commentary - Trade Now) co-founder Larry Page would be taking over as the CEO from Eric Schmidt starting April 1 was that it was a negative for the stock in the short term.

This was counter to the initial jump in the stock in the response to the strong quarterly results. The stock initially bounced from $626 at the close of Thursday to $644 about 45 minutes after the news broke about Schmidt's departure from the top job. Those who were bullish on the stock were making the case that a strong company trumps the importance of the CEO.

Although I agree with the power of a group over any one individual or leader, a CEO carries significant weight for investors when looking at a public company. Although Google is a known company -- now public for over six years -- the price action in Google on Friday suggested that people are nervous about Larry Page's ascension.

If you sold your Google stock immediately at the open on Friday, you got $640 for the stock. It immediately dropped below that and didn't stop all day. It closed below $612 by the time Friday's session was over.

What does the market have to fear from Page leading the company? The hundreds of profiles about him describe him immediately as "smart." They say that "he's always been interested in the business" -- that's supposed to be a selling point? They say that he's driven and that he has always admired Apple (AAPL -commentary - Trade Now) co-founder Steve Jobs. And Schmidt and former IPO banker and Google employee Lise Buyer have gone out of their way to say that this succession has always been planned and that Page was always slated to take the top job.

I don't know Larry Page, haven't met him and have barely ever heard him speak, aside from his brief comments on Thursday's earnings call. (Is it unreasonable to expect that the new head of a $200 billion company would stick around longer than 10 minutes to answer questions, including the bland comment, "I'm incredibly excited about the possibilities to come"?)

...

[*** This post is an excerpt of the full article, available by clicking here to go to RealMoney.com. Note: subscription required. ***]

Sphere: Related Content

Reuters: Google shareholders lose that loving feeling

From Reuters:

Thu Feb 19, 2009 3:24pm EST

By Alexei Oreskovic - Analysis

SAN FRANCISCO (Reuters) - Google Inc is famous for pampering its employees, but some shareholders feel like they're getting a raw deal.

The sore spot became evident after the Web search leader decided last month to reset the price of underwater employee stock options, in light of a more than 50 percent drop in Google's share price from its November 2007 peak of $747.24.

The move, which will result in a $400 million charge, provoked grumbling among some investors who are not being similarly compensated.

While investors have griped about Google's unconventional actions in the past, such as its refusal to provide earnings forecasts, its appreciating stock price had muted most of the discord. But with shares well off highs, some analysts say Wall Street may be less willing to give Google a pass this time.

"I don't have as good a feeling as I did before about the company," said Jerry Dodson, chief executive of Parnassus Investments, which bought Google shares when they were priced in the low $400s. The stock was trading at $343 on Thursday.

For now, Dodson said he is prepared to live with Google's offer to reset the price of employee options with a strike price below Google's closing price on March 6. "But it puts all of us that have invested in the company en garde," he added.

Patrick McGurn, special counsel of RiskMetrics Group, which advises institutional investors on governance and proxy issues, said Google has some fence-mending to do, as there may be an outpouring of discontent at the company's annual shareholder meeting, which is usually held in May.

McGurn said the option repricing plan is clearly not shareholder friendly, but it is too soon to say whether his firm might recommend shareholders to take any action.

TRACK RECORD

Stock options provide incentives for employees to work hard and share in profits. But the option becomes worthless when the market price falls below the exercise price. Google has said about 85 percent of employees have underwater options.

"Because motivating and retaining employees is a good thing both for those employees and our shareholders, we believe this exchange works for all involved," said Google spokeswoman Jane Penner.

Many investors feel Google's plan, which lets employees exchange underwater options at a one-to-one value, is overly generous and not necessary given the difficult job market.

But analysts say the issue would quickly be forgotten if Google resumed its track record of impressive growth and innovative products once the economy began to recover.

"As long as the company continues to execute, I think shareholders will give them a lot of leeway," said UBS analyst Ben Schachter.

Indeed, Google shares have risen about 12 percent since it delivered better-than-expected quarterly results in January, when it detailed the option exchange plan. That compares with a flat Nasdaq composite index over the same period.

That said, it's still unclear whether Google can buck the recession, or whether it's simply a matter of time before it feels the effects of wide corporate cuts on advertising spending.

In the fourth quarter, Google's revenue grew 18 percent to $5.7 billion, much better than rivals including Yahoo Inc, Time Warner Inc's AOL and IAC/InterActiveCorp. But growth was below the 30 percent-plus rates Google had delivered in previous quarters.

The company is already taking a harder look at costs, pulling the plug on various projects and slowing its hiring.

DUAL CLASS SHAREHOLDER STRUCTURE

Still, Google provides various employee perks, such as free all-you-can-eat meals at several on-campus restaurants, which might strike some as extravagant in the tough economy.

And some say Google is inherently unreceptive to investor input. Its dual-class share structure gave three individuals -- co-founders Sergey Brin and Larry Page, and Chief Executive Eric Schmidt -- 67 percent of voting rights as of 2008.

"Having that unequal voting right in and of itself tends to indicate that shareholders definitely take a back seat," said McGurn of RiskMetrics.

Critics of Google fault it for not holding a shareholder vote on the options exchange plan, as most companies are required to do under Nasdaq and New York Stock Exchange rules.

It is possible for a company to avoid a shareholder vote when its stock option plan explicitly allows repricings, as is the case with Google's 2004 stock option plan.

"The (institutional shareholders) really, really don't like repricings, particularly those that don't get shareholder approval," said Michael Frank, a partner in the employee benefits and executive compensation group at the Morrison Foerster law firm.

"So they may tend to vote against a future proposal with respect to the plan; for example if a company wants to add shares to the plan," Frank said, speaking generally and not about the Google situation in particular.

Given the dual-class share structure, investors may have little recourse other than a symbolic protest vote.

Those who invest in Google signed away a lot of their rights to complain about decisions, said Ironfire Capital's Eric Jackson, who was involved in an activist campaign directed at Yahoo in 2007, but who does not have a position in Google.

"Many investors have chosen to do that because they assumed growth is going to be fantastic and they wanted to be along for the ride," he said. "It's instances like this that cause shareholders to take a step back and think about it."

(Reporting by Alexei Oreskovic, editing by Tiffany Wu and Gerald E. McCormick)

Sphere: Related Content

Google's Interest in GeoEye and Geospatial Imagery

A few days ago, I wrote about Google's potential interest in buying geospatial imagery company, GeoEye. Here are some additional reasons for why Google might want to acquire GeoEye and control the actual satellites and additional analytical tools which GeoEye possesses as a supplement to their Google Earth product.

One of the first companies which Google acquired after it went public in 2004 (for an undisclosed sum) was Keyhole -- the foundation piece for Google Earth. As a carry-over from that acquisition, Google has continued to sell its Google Earth imagery to end users for a fee: Google Earth Plus (for a $20 annual subscription) and Google Earth Pro (for a $400 annual subscription).

At first glance, it doesn't seem to make sense for Google to keep such a subscription model in place with its dominant Google AdWords Search model. Yet, Google aspires to make money beyond AdWords. They have continued to invest in a competitive suite of applications as an alternative to Office (called Google Apps). They have done so, because they believe people will save their data and files through Web services in the future (in the cloud) rather than on their PC. If this occurs, Microsoft is tremendously weakened and Google grows.

Google Earth is yet another way for Google to make money. However, it is less a money-maker on its own, rather than a way of driving loyalty and therefore revenues back to Google Search and Google Apps. For Google to keep its Google Earth subscription model in place 4+ years since the Keyhole acquisition suggests it has further plans for this model of selling its high-end earth imagery. It is not a mistake that it has maintained this model.

Consider this also. Google is interested in developing its relationship with Government (the largest customer for satellite imagery). Go to www.google.com/federal for more evidence of this. Google's focus in this niche centers on 3 services: Search, Geospatial Images, and their Google Apps suite of Web services (Gmail vs. Outlook, their own apps vs. Office). (To see an example of a government client that has used Google Earth to improve their efficiency, see this case study on the US Forest Service.) As Google develops their relationships with such a client, it becomes much easier to go back and communicate the benefits of search and Google Apps. Microsoft would have to more heavily invest in its Virtual Earth offering to keep up with Google (or perhaps acquire GeoEye's smaller competitor, DigitalGlobe -- who's revenues at the time it filed its S-1 earlier this year were smaller than GeoEye's).

One government client that Google has great interest in developing a relationship with is the National Geospatial-Intelligence Agency (or NGA). NGA also happens to be GeoEye's largest customer. This coming week, Google is a Gold Sponsor of the NGA's Industry Day. This is a classified conference for US citizens only at which the NGA will lay out their plans for the coming year. (GeoEye is a Silver Patron for the conference.) Google will be continuing to push the benefits of Google Earth and Google Search Appliance (its tool for pulling key information from government clients' own records) at this conference and afterwards. They would not sponsor this conference if they did not see opportunity in this government vertical in the years ahead. (GeoEye's chief competitor, DigitalGlobe, is interestingly not a sponsor at this event.)

Some evidence that the NGA has big plans in the years ahead came out last week when the IT consulting firm NJVC, who works closely with the NGA and is also a Gold Patron at the conference mentioned above, announced that it is expanding its square footage by 33% and hiring 100 new employees in expectation of significant growth in the firm in the coming 4 years. NGA is NJVC's largest customer.

Matt O'Connell, CEO of GeoEye, has also discussed rapid expansion to keep up with planned growth in orders from NGA and other customers now that the new GeoEye-1 satellite was successfully launched last week. GeoEye did $200 million in annual revenues a couple of quarters ago and will certainly exceed that in the coming 2 quarters now that they've successfully launched their newest GeoEye-1 satellite last week. The NGA will continue to be a very important customer to GeoEye.

Google also clearly sees opportunity here in this space. The question for Google is how can it take Google Earth to the next level? This is where GeoEye becomes interesting as an acquisition target. By owning GeoEye, Google would own the proprietary images it captures from its satellites. There would continue to be the need to invest in future satellite launches to stay ahead with the most up-to-date technology but Google certainly has the capital and the interest in space to do this. Owning the satellites also allows Google to develop the tools and unique services which can become integrated into Google Earth but (perhaps more importantly down the road for Google) its Android operating system which it will roll out on future mobile handsets (think highly unique location-based services here).

Google could sit back and just buy images (as Microsoft and Yahoo! do) from GeoEye and DigitalGlobe, letting them take the risk of launching the satellites, but their opportunities to develop proprietary location-based services would diminish (or become easier for Microsoft, Yahoo! and others to copy down the road).

GeoEye is a more compelling potential acquisition target for Google than Digitalglobe for two reasons: (1) it has the newest satellite in space today with the most advanced features and (2) it has a cadre of tools for using the images which their private competitor DigitalGlobe lacks. These tools came, in large part, from the MJ Harden acquisition done last year by GeoEye. More tools, from Google's perspective, means more usage of Google Earth from its clients and therefore more usage of Google Search and Apps.

Additionally, Google and GeoEye have grown closer in these last few weeks. The two companies agreed that GeoEye would not sell its images from GeoEye-1 to any other online portal. Google's co-founders, Larry Page and Sergey Brin, were at the launch of GeoEye-1 in California last Saturday (Page remember has signed up to be launched into space himself in 2011).

Google doesn't buy GeoEye for $200 million a year in revenues. It buys GeoEye to make Google Earth and Android truly remarkable in the years to come, as well as cementing Google's place in the Government vertical with its core Search and Apps offerings.

A deal before the end of the year would make sense as GeoEye is beginning discussions with other parties about funding its next satellite GeoEye-2. Google has the opportunity to control the specs of what that would look like if they do the deal now instead of waiting and having to share the specs with other parties.

At the time of publication, Jackson was long GeoEye.

Eric Jackson is founder and president of Ironfire Capital, LLC, and the general partner and investment manager of Ironfire Capital US Fund LP and Ironfire Capital International Fund, Ltd.

Sphere: Related Content

TheStreet.com: Activist Investor: Why Google Cares About GeoEye

09/11/08 - 10:00 AM EDT
By Eric Jackson
TheStreet.com

GeoEye (GEOY Quote - Cramer on GEOY - Stock Picks) is a relatively small company that takes pictures of the Earth from three satellites it operates in space. You've probably never heard of it. However, Google (GOOG Quote - Cramer on GOOG - Stock Picks) co-founders Sergey Brin and Larry Page have. In fact, both attended last Saturday's launch of GeoEye's newest satellite at Vandenberg Air Force Base in California. In fact, Google's logo was on the side of the rocket that launched the satellite into space.

Why were they there, and what does it mean for Google and GeoEye investors?

I wrote about GeoEye earlier this year and have a large long position in the company. While the company has had issues largely of management's own making (delays in the launch of the satellite, minor earnings restatement and poor communication with investors), it has now overcome all of these with the near-textbook launch of the GeoEye-1 satellite last week.

GeoEye operates in a duopoly in the U.S. with DigitalGlobe, a smaller, private and less well-capitalized competitor. Both companies take geospatial images of Earth and sell those to governments and commercial customers. Until the last six months -- when GeoEye gave up some market share to DigitalGlobe, which launched its newest satellite in the sky last fall -- GeoEye was a $200-million-a-year company with 45% operating margins. It will now quickly return to that size and much more in the next year.

GeoEye-1, the satellite launched last weekend, is a game-changer for the industry. It's the first satellite to take color images of earth with the highest resolution. If you want to snap some images of a baseball plate at your local park, GeoEye-1 is up to the task. DigitalGlobe, assuming it goes public in the next year, will not leapfrog GeoEye with a better satellite for at least two years.

From a valuation perspective, GeoEye is compelling. The stock closed Wednesday at $26.31. Assuming the company returns in 2009 to its revenue run rate of six months ago, GeoEye is trading at 5.2 times 2009 earnings. BCC Research estimates that GeoEye's industry market is increasing from $1.9 billion this year to $3.2 billion by 2012. With that type of growth rate, a valuation of 12-15 times 2009 earnings is more than justified for GeoEye today, which would put shares at $60-$76.

The largest risk facing GeoEye -- and weighing on the stock -- had been the prospect of an unsuccessful launch of GeoEye-1 last Saturday. That risk is now past. In 30-45 days, GeoEye's largest customer, the National Geospatial-Intelligence Agency for the U.S. government, will sign off on the quality of the first images and start to place orders with the company.

The Google Factor

All of these valuation assumptions don't take into account that GeoEye announced, just days prior to the launch, that it would provide images from GeoEye-1 to Google exclusive of other online portals. The company has yet to give financial details of the arrangement, but Google clearly cares about GeoEye, as the attendance of the founders at launch confirm.

GeoEye is strategic to Google from a couple of angles. First, GeoEye will provide images to Google Earth and Google Maps. More importantly, GeoEye is intimately tied with Google's plans for Android, the mobile operating system it will roll out to handset providers later next year. Google is effectively buying proprietary mapping technology from GeoEye that can be later integrated into new location-based services we have not yet seen.

For example, with high-resolution images from a satellite that circles the earth several times a day, it becomes possible to integrate real-time traffic information when plotting traffic directions. It also becomes possible to easily track GPS-equipped vehicles.

GeoEye also has significant mapping tools that can be used to analyze multiple or time-series images, an interesting feature that could be interesting for Google Earth and Google Maps to implement.

If the connection between Google and GeoEye came down to merely improving Google Maps, you might have expected a Google product manager to attend last week's launch, not the co-founders. The fact is that Brin and Page have a personal interest in space. From investing early in Google Earth to last year's news that Brin signed up to take a personal space flight in 2011.

While some Google critics have poked fun at the company's interest in space, you cannot watch a news broadcast now without seeing some wide-angle image of a country that zooms into the city or location of interest to the story courtesy of Google Earth. There is also a long-term secular trend that we want to know exactly what's happening now in any place globally. The most accurate and up-to-date images of earth are part of that trend, and GeoEye-1 falls in the sweet spot of that demand. Google intends to take advantage of that (to say nothing of the government's continued interest in this information).

Put all of this together and you need to attach a premium to GeoEye's shares as a potential takeover target by Google beyond the price target I mentioned earlier. GeoEye is currently putting together plans to build GeoEye-2, its next-generation satellite for launch in 2011. Google just might want to have that satellite exclusively for its own use. If so, Internet giant would likely want to purchase the company in the next six months, before others agree to funding terms with GeoEye to develop that satellite.

Keep your eyes on the sky for a fast-rising GeoEye stock price.

At the time of publication, Jackson was long GeoEye.

Eric Jackson is founder and president of Ironfire Capital, LLC, and the general partner and investment manager of Ironfire Capital US Fund LP and Ironfire Capital International Fund, Ltd.

Sphere: Related Content

US News & World Report: On the Record with Sydney Finkelstein

Dartmouth Tuck School Professor Sydney Finkelstein was recently interviewed by US News and World Report. He was asked to discuss his new Business Bestseller "Breakout Strategy" and how organizations can achieve "breakout performance."

The US News article is here.

Find out what Sergey Brin and Bob Dylan have in common.

Information on the BPI tool is here. The BPI tool was created by Jackson Leadership and Sydney Finkelstein to help organizations pinpoint the leadership, strategy, and process leverage points and "red flags" to help achieve significantly higher growth and performance.

Sphere: Related Content