It comes down to one word: software. What can ubiquitous, chip-based intelligence do, under the control of networked software? We tend to think of software in terms of the programs we use each day. Google makes that sort of software. Apps, Chrome, Android,
But what if Google isn't just waiting for you? What if it's in the machines all around you? What if it's anticipating your needs? What if Google can drive the ambulance to you, and tell the paramedics just what they need to do?
This is why Google is trading at nearly $700/share, with a PE ratio almost double that of Apple (AAPL). Software is where the margins are, not hardware.
With its ongoing global network expansion paid-for out of cash -- the company has $45 billion in cash and short-term investments on its books -- incremental income all comes down to the bottom line. The recent fall in its margins is all down to the risks of being in the hardware business, and over time the company has made clear it wants to exit that, as much as possible.Google has become what Microsoft (MSFT)was in 1995, when Bill Gates wrote his ill-fated book "The Road Ahead,"
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