After beating analysts expectations with third quarter profits of $6.72 per share - a year-over-year increase of 31% - Google (Nasdaq:GOOG) is currently trading near its 52-week high as many investors remain convinced that the tech giant is an undervalued value stock. With a price to earnings ratio of 25 and a price to sales of 7.14, Google is obviously trading at much higher multiples than firms in its industry. However, these valuations are justified based on the impressive growth rates, financial strength, profitability and management effectiveness that are associated with the stock.

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Diversification
Although North American search has been the primary driver of the business, Google has been slowly expanding its technologies onto the international scale. Revenues generated in the UK and other parts of the world account for a higher percentage of earnings than those generated in the United States. International third quarter revenues accounted for 52% of the total $7.3 billion. Also, organic search engine growth has by no means stifled from diversifying the amount of available revenue streams. Cost per click and the number of sponsored clicks have shown steady year-over-year and sequential improvements.

Dominant Market Share
Google has a commanding market share lead over North American rivals Yahoo (Nasdaq:YHOO), AOL (NYSE:AOL) and Microsoft (Nasdaq:MSFT) in the search engine industry. According to comScore, Google sites attracted 66.1% of web traffic in September, while Yahoo, Microsoft and AOL received 16.7%, 11.2% and 2.3% respectively. Although the integration of Facebook and Microsoft's Bing search engine could pose a long term threat to the internet giant, Google is not exclusively dependent on search to drive its top and bottom line growth. (Check out Facebook Surpasses Google.)

Communication
Google Voice, which competes with Skype, and Android, which competes with Research In Motion (Nasdaq:RIMM) and Apple (Nasdaq:AAPL), will add a long term synergistic income stream to compliment Google's search engine. In 2009, Android had a minuscule 3.9% Smartphone OS market share, compared to 14.4% and 19.9% held by the iPhone and BlackBerry respectively. In 2010, Android's market share slightly exceeded that of its two aforementioned competitors; by 2014 however, Android is forecasted to have a larger OS market share than the iPhone and Blackberry combined! Google's expansion to other lines of operations has been widely successful.

Acquisitions
67% of total revenues are still attributed to Google sites; however, Google network revenues increased by 22% compared to the 2009 third quarter. Through a wide variety of strategic acquisitions in the last year, management has been able to enhance external growth of the business. Following the 2006 $1.65 billion acquisition of YouTube and the 2007 $3.1 billion acquisition of DoubleClick, Google has been on a massive buying spree, purchasing 24 companies in 2010. Some of these acquisitions have been in the social gaming, travel, online video and social networking spaces. These strategic acquisitions have slowly come to fruition and are expected to produce long-term ongoing benefits to the company.

Bottom Line
Recently, Google has moved beyond the internet business, investing in wind farms and taking on other forms of green initiatives such as the Google PowerMeter. As Google diversifies its business model beyond internet search, it is interesting to predict what Google will become in 10 years.

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