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Google Stock Drag

Phil Harvey
2/23/2007

NOON -- From The Philter's Don’t Bet Against Google (Nasdaq: GOOG) file comes this note from Cowen and Co. analysts Jim Friedland and David Geisler on the subject of Google's stock value. Their opinion is that Google shouldn't suffer following YouTube's loss to Joost in a recent deal with Viacom because YouTube's still too young and won't impact Google's financials yet:

We believe one of the reasons that Google is trading off its recent highs is a series of setbacks in non-search initiatives, especially in video. YouTube talks with Viacom and CBS ended unsuccessfully, and Viacom has made a separate deal with Joost (an online video startup backed by the founders of Skype).

We believe these concerns are overdone because: (1) our DCF analysis indicates that YouTube will not have a meaningful impact on Google’s valuation, even if it is highly successful (search advertising is the overwhelming driver of value in our view); (2) we believe YouTube will eventually sign deals with major content owners; and (3) it is way too early to expect YouTube, which launched 22 months ago, to generate meaningful revenues (it took five years for Google revenues to begin to scale). We are maintaining our Outperform rating.

— Phil Harvey, Dubious Setbacks Editor, Light Reading

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