In ordering a new 12 to 18 month price target of $260, which is less than the $275.11 Google stock closed at Dec. 2, Chowdhry noted:
"Contacts tell us that y-y (year over year) the number of Keywords are down 2 percent to 5 percent, bid rates on many keywords are down 20 percent, while bid rates on a very few keywords were up 5 percent to 8 percent. Contacts tell us that Google is benefiting from the shift in ads from traditional media to digital media, however this shift is not sufficient to overcome the downward macro-economic pressures. Contacts also tell us that online users are selectively tuning off the right side of search results, which are sponsored links. This may reduced the number of paid clicks, which in turn may negatively impact Google's revenues."
Chowdhry also said internal conflicts of interest exist on Google's board, with venture capitalists possibly influencing Google to make business decisions. Moreover, he cited contacts who expect Google to lay off 10 to 15 percent of its full-time workers in 2009.
Adding insult to injury, Chowdhry noted that one of the negatives affecting Google is Microsoft's increasing success.
Microsoft is giving paid search credits to ad agencies, which is forcing Google to meet or beat these search credits, and is getting user IDs through its Live ID effort to drive signups. This drives traffic, which in turn spurs revenues.
Will Microsoft be able to capitalize on Google's alleged troubles as the recession deepens? Will Microsoft gain search share and wrest the cloud computing mantle from Google in 2009 with its Microsoft Azure Services Platform?
One wonders what Google will be able to do to stanch the many cuts Chowdhry noted, while simultaneously shaving off businesses that drag or drain the company's bottom line.
CEO Schmidt has held meetings with top executives to determine where to focus investment, according to the Journal. Top priorities include display ads, mobile advertising and Google Apps.
What Google manages to do (or not do) in these sectors will be noteworthy.