Google's share price is currently $482. Their price-to-earnings ratio is about 70. For those unfamiliar with PE ratios, 70 is appropriate for a start up that is about to explode all over the market. A big company with a 70 indicates a possible over-valuing of the stock, like Amazon had back when it was around $100 per share.
At first I thought that Google was appropriately valued. I started using many of their services, such as their document and spreadsheet editors on line. I like Blogger, despite its hiccups with uploading photos. The transition to the new version of Blogger has changed my mind.
Blogger has rolled out a new, improved version and users are beginning to convert over. I tried when prompted by Blogger about a week ago, but after a while it came back and said it was unable to convert my blog and I would have to wait. I thought nothing of it and went on using the old version. Now there is a massive wave of people who have not converted, but can't leave comments on sites with the new version of Blogger. This is indicative of serious software development problems at Google.
Software development is a fairly mature technology. There are accepted processes used by large software development firms for configuration management, testing and code reviews. There are even metrics for determining just how sophisticated your group is at software development called Capability Maturity Model Integration (CMMI) levels.
Where I work, we strive to be CMMI level 3 in our software efforts. We are not a software house, so we're not the most sophisticated of developers. In spite of this, an error like the commenting problem would never occur with our code. These errors, like the photo uploads before them, are indicative of very poor internal processes and a culture of sloppiness. Such a culture is no joke to change. It's reasonable to assume that much of Google's code base is in similar disarray. Poor software practices are rarely confined to single groups, particularly on something as prominent as Blogger. For a product that delivers the ability to allow people to broadcast their message globally, you would expect significant corporate oversight into the project. The fact that Blogger has so many bugs suggests that the rest of the company's products can't be much better.
I'd buy a stock with a PE of 70 only if I knew for sure that they had sustainable, long-term, strong growth ahead of them and I knew their products to be of high quality. I can see strong short-term growth with Google, but if their products continue to be so shoddy, I don't see support for such an inflated stock price.