Google Stockpiling Cash: Storing Nuts For Economic Winter Or Just Plain Nuts?

Seems every time Google's CEO Eric Schmidt mentions the harsh economic times we are experiencing the company's stock price drops. Now, following his comments last week about the company stockpiling cash with no immediate plans of acquiring any new companies - Twitter seems to be everyone else's popular choice - the stock has fallen again (nearly 5% at the time of writing this).

The possibility of Google acquiring Twitter has been discussed by many recently, as has the idea of Twitter challenging Google in the future.

Marketing Pilgrim's Andy Beal suggests that Schmidt's denial of plans to buy Twitter could be double talk to allow the price to drop.

"Don't believe Google's slight-of-hand talk about the timing not being right. The timing is perfect! While other companies pull back on spending-causing Twitter's valuation to drop due to lack of interest-Google can fly in under the radar and pick up perhaps the most important internet start-up since Facebook," Beal stated.

Google recently has talked about long term plays to help the economy such as going green, which Schmidt has stated will improve Google's bottom line.

Google is in a tough place themselves - stock prices have drop more than 50% over the past 12 months and over 60% from its high of nearly $750, just over 12 months ago.

Recent layoffs and closing of products once thought of as Google's move to aggregate the world's information may be eroding investor confidence. Storing nuts for a harsh economic winter shows investors that Google has no faith in its own industry. This approach is not what got Google to the forefront in the first place. They were innovators who took a stand and maintained its search core while building other ancillary products and buying complimentary companies.

Buying other companies and investing in others helps stimulate the economy at a time when there is a need for more jobs and security for the ones that exist. Even if Google does intend to hold on to its cash, making such a public statement about it may not have been the wisest move.

Obviously, Schmidt's public statements is not the only contributing factor to Google stock price drop and being a squirrel right now could be a smart long term play, but is not a leader's play. Has Google joined the status quo? It may be a safe play, but not one indicative of an industry leader.

About the author

Frank Watson has been involved with the Web since it started. For the past five years, he headed SEM for FXCM -- at one time one of the top 25 spenders with AdWords. He has worked with most of the major analytics companies and pioneered the ability to tie online marketing with offline conversion.

He has now started his own marketing agency, Kangamurra Media. This new venture will keep him busy when he is not editing the Search Engine Watch forums, blogging at a number of authoritative sites, and developing some interesting online community sites.

He was one of the first 100 AdWords Professionals, a Yahoo and Overture Ambassador, and a member or mod of many of the industry forums. He is also on the Click Quality Council and has worked hard to diminish click fraud.