Standard & Poor's gives Google the U.S. debt treatment

S&P equity analysts downgrade search giant in wake of Motorola Mobility purchase

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Quo vadis?
These price targets are ridiculous. If S&P actually knows where prices are going, why aren't they running the world's largest hedge fund?

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First, the U.S. debt rating. And now Google.

Standard & Poor's on Tuesday downgraded Google's stock (NASDAQ: GOOG) to a "sell" from a "buy" in the wake of the search giant's $12.5 billion acquisition Monday of Motorola Mobility. S&P lowered Google's price target to $500 from $700.

[Are Motorola's patents enough to protect Android? and Motorola workers likely thrilled by Google's buy]

Shares of Google fell 18.23, or 3.3%, to 539 in Tuesday's trading. Since July 26, Google shares are down 14.1%. For the year, Google's stock is down 9.3%.

In announcing the downgrade, S&P analyst Scott Kessler said the acquisition of Motorola Mobility -- maker of smartphones running on Google's Android mobile OS and possessor of about 17,000 mobile and wireless patents -- poses "greater risk to the company and stock."

From USA Today:

Kessler noted that despite Motorola Mobility's "extensive and and valuable patent portfolio," S&P wasn't sure it could protect Android from intellectual property disputes.

Further, he noted, the Goolge-Motorola deal would negatively hit the search giant's growth and financials.

That's because in buying Motorola Mobility, Google acquired a low-margin device manufacturer with a huge payroll. In contrast, Google's core business -- online advertising revenue derived from its market-leading search engine -- generates tremendous margins.

(Business Insider's Henry Blodget published a long column Tuesday detailing why he thinks "Google-Motorola will be a colossal disaster. It's an interesting read.)

S&P, of course, triggered a fusillade of political finger-pointing on Aug. 5 when it downgraded U.S. debt to AA from AAA, citing ongoing dysfunctionality in Washington regarding the debt ceiling, deficit spending and general economic idiocy.

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