Standard & Poor's just-released The Outlook newsletter contains a few interesting predictions about the market for Internet stocks in 2009:
1. Google will outperform the S&P in 2009.
Google's relationship with Apple will, due to growing competition between the companies, become increasingly uneasy...Nonetheless, even though we believe Apple is working on some kind of search technology that could help enhance iTunes, we don't see the company as a likely near-term entrant in the search wars. We believe Google will continue its successful push into the mobile segment, as a number of Android-enabled phones are released by the likes of Motorola, Sony Ericsson, and Samsung...although the precise impact will be unclear, we expect Google's financials to benefit significantly from the mid-2008 addition of CFO Patrick Pichette...As a result, we expect the stock to notably outperform the S&P in 2009.
2. Microsoft and Yahoo will finally bury the hatchet.
The companies..."will decide to join forces to better compete against Google, in our view. We don't expect Microsoft to try to buy Yahoo outright, and have mixed views about whether Microsoft will attempt to purchase Yahoo's search business, but at the least we see some kind of significant joint venture related to search. We think its development will help Yahoo shares, on which we have a buy recommendation, outperform the S&P in 2009.
3. A flight to quality in Internet advertising.
We foresee a flight to quality in Internet advertising and an associated consolidation of online advertising networks. Our strong sell opinion on ValueClick reflects the related challenges we see. Specific to ValueClick, we also have concerns about other offerings from its media units, and its e-commerce-related affiliate marketing and comparison shopping segments.
4. A lack of mult-billion-dollar transactions.
[But we] expect a number of sub-billion-dollar deals, as companies look to better focus and raise cash. We would not be surprised to see activity associated with Akamai Technologies, Infospace, Move, and RealNetworks.