Sanford Bernstein Analyst Jeffrey Lindsay raises the interesting comparison of Google, Microsoft and Yahoo as the Web equivalent to Ford, General Motors and Chrysler more than 60 years ago. Lindsay notes that the downturn of 2001 to 2003 in Web advertising allowed Google to emerge. Yahoo fumbled the chance to buy Google; instead, the search giant went public and became the Web's biggest company.
Lindsay wonders whether the market conditions are now right for the next Google to emerge. Facebook, for example, had its chance to go public but blew it. "The problem today is that today's internet players have formidable cash piles which they can use to buy up almost anything," Lindsay writes. "The venture capital players that brought the Internet sector into being have generally less cash to hand and are becoming increasingly interested in other sectors."
Where's the parallel with the auto industry? Buick, Oldsmobile and Chevrolet were the high tech startups of the 1940s, says ZDNet's Larry Dignan. They eventually merged together to become GM. Nowadays, any company that poses a threat to Google or Microsoft is gobbled up, Dignan says. According to Wikipedia, Microsoft makes an acquisition about every three weeks; Google does so about every five weeks. "We think having massive cash reserves causes the Internet companies to do the wrong thing," Lindsay says, such as buying too many companies instead of returning cash to shareholders.