• Category: News

Google Share Price Tumbles Momentarily Following Gmail Censorship in China

Shares of GOOGLE Inc (GOOGL) fell by 0.28 percentage points down to $540 in pre-market trade following reports that China had blocked access to Gmail in the days after Christmas. The complete censorship comes after months of ad hoc disruptions to the largest email service in the world.

Google Share Price Tumbles Momentarily Following Gmail Censorship in China

Chinese users, who are caught up in the government-imposed Great Firewall have been unable to access Gmail services since December 26, 2014. These developments follow the appointment of a new chairperson to the China Internet Network Information Center (CNNIC).

Users have been completely unsuccessful in accessing Gmail services even through third party mediums such as Microsoft Outlook and iOS, which were initially accessible in previous censorships at the start of 2014.  Following consecutive disruptions, regular Chinese are only able to access their Gmail accounts through Virtual Private Network services.

 

Worrying market signals

Google’s Transparency Report indicates that Chinese traffic to Gmail declined sharply since Boxing Day and completely dropped to zero on Saturday, even though there was a small increase in traffic on Monday.

According to Taj Meadows, a Google-spokesperson for the Asia Pacific region, there are no technical hitches on Google’s side, countering claims by the Chinese government that it was behind the Gmail blackout.

The U.S. State Department is concerned by China’s actions to implement wide scale censorship on the U.S. based email service provider. Jeff Rathke, a state Department spokesperson said, “We encourage China to practice transparency with its dealings with international firms and to consider the market signals it is sending with such actions.”

 Option Fair

A tight balance between free market and security

China, a historically closed country is struggling to open up its markets to global companies and to maintain its national security. A member of the internet-transparency groups GreatFire.org says, “I think the Chinese government is further eliminating Google’s presence in the country and trying to weaken the company’s market position overseas.

In 2009, Google closed its search engines in mainland China following a series of disruptions to the search services. Even then, Google search and it subsidiary products remain popular among the younger generation in China who are apprehensive about government monitoring of emails.

China has a tight grip over the internet. The country boasts the world’s most advanced internet censorship system, known as the Great Firewall of China.

 

Market Impact of Chinese Google Censorship

Following reports of the Gmail blackout, market analysts still rated GOOGLE INC (GOOGL) as a BUY. This assessment can be attributed to several strengths demonstrated by the Google Inc. stock. In spite of a modest net income growth, the company boasts impressive year on year revenue growth, good valuation and debt levels, positive cash flow and an impressive profit margin.

Looking back on the last quarter, the 20.1 percent revenue growth at GOOGL was positive but it was below the 28.8 percent industry standards.

Impressively, the company’s debt-to-equity ratio is low, indicating a stable market position and an ability to maintain solid cash flow in the long term. In the last quarter, cash flow increased by 17.2 % or $6 million; however, this was still below the 26.53 percent industry growth rate. 

In the last quarter, GOOGL share price has witnessed a sharp decline compared performance in the same quarter in 2013. However, market analysts predict an Earning Per Share (EPS) growth in 2015.

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