Parting Ways With Google

MILLBURN, N.J. (Stockpickr) -- Recently, I made a change to my Bar Mitzvah Portfolio, which I'd previously updated in January.

I have decided to part ways with Google(GOOG). Google remains a fine company, employing some of the best engineers in the Internet/technology world. I use the company's Chrome browser, and Google is my primary search service. Google is rich in cash and has zero debt. Furthermore, the company has made many investments that should pay off in the future.

Unfortunately, I have become weary of the management team's ability to lead this company into the future. Specifically, there are three recent events which when taken together have led me to my decision.

1. In January of this year, Google announced that it would stop censoring search results in China after the company detected attacks on emails of Chinese human rights activists. On March 22, Google redirected its China traffic through Hong Kong. That cuts out about 30% of the planet from using Google. In the process, Bidu(BIDU), the Chinese Internet search service, was left as the primary search service in that country. While Google's actions might have been morally correct, they were not optimal for shareholders.

2. In May, German prosecutors opened a criminal investigation into Google. The German authorities were concerned about Google's method of collection of private data from unsecured wireless home networks in Germany. Google was required to but did not agree to hand over disk drives with the incriminating data to local authorities. The investigation is still pending.

3. While Google received Federal Trade Commission approval to acquire AdMob, apparently there was some internal opposition at the regulatory body to the deal. I fear that the FTC and regulators in Europe could plan to sue Google on antitrust or anti-competitive issues. Google commands an overwhelming share of Internet advertising and search revenue in the U.S. and Europe. Europe is in desperate financial condition and could seek a source for fines or attempt to support European competitors. Google could be the easy low-hanging target. In the U.S., an antitrust lawsuit spells trouble.

These issues are all emblematic of a company that lacks the proper management team. Larry Page, Sergey Brin and Eric Schmidt are all brilliant engineers and technologists, but they lack corporate managerial acumen. As the company increases its global footprint, that triumvirate is increasingly putting the company at legal risk for which it has no experience to navigate.

Who Owns Google? Chris Davis SAC Capital Navellier & Associates