Google Inc. became the unexpected darling of Wall Street when stock in the Internet search engine skyrocketed over the past two years to a peak of nearly $472 a share.
In recent weeks, however, the company whose philosophy holds that you can be serious without a suit and make money without "doing evil" has seen its market fortunes shift. Yesterday, the stock closed at $342.38, down more than $129 from its January high.
Google's rise and fall can be attributed in part to overzealous investors who, in a flashback to the Internet bubble of the late 1990s, were willing to overlook risks to the company's business model, analysts and industry experts said. The wild ride also comes as Google has become entangled in controversy, such as efforts by the Chinese government to censor the Internet, an issue that led lawmakers to call executives from Google and other companies to Washington yesterday.
But in a broader sense, Google's market stumble might be a foreshadowing of the knocks the company will have to take as the world's most-used search engine.
Despite its do-gooder credo, Google could face a fate similar to that of Wal-Mart Stores Inc., McDonald's Corp., Microsoft Corp., and other groundbreaking giants that rose to dominance in their industries and then met with suspicion.
"For the longest time, Google was the magical and untouchable company, and so investor confidence hasn't reflected all of the realities," said Jim Harper, director of information policy studies at the Cato Institute, a Washington think tank. "It's just a natural progression. If you're successful, you're going to get someone to hate on you."
One need not look further than the Internet to find Google detractors. The Web site, google-watch.org, for instance, posts cartoons lampooning the company and references to Google as an Orwellian "Big Brother."
Google has faced some of its harshest criticism for its recent decision to launch a version of its search engine in China that excludes information censored by the Chinese government, following similar decisions by Yahoo Inc. and Microsoft. Cisco Systems Inc. has sold filtering equipment to China, which has come under fire for human rights abuses.
In moving into the lucrative market, Google said it sought to satisfy the interests of users, expand access to information and respond to local conditions. The company also said it will tell users when content has been blocked.
Rep. Christopher H. Smith, a New Jersey Republican, said in an opening statement for the congressional hearing that Google, Yahoo, Cisco and Microsoft "have compromised both the integrity of their product and their duties as responsible corporate citizens. They have aided and abetted the Chinese regime."
On Tuesday, Tibetan groups that agitate for an end to Chinese rule in the Asian region staged Valentine's Day protests against Google in London, Toronto and Mountain View, Calif., where the company has its headquarters. They posted their activities on noluv4google.com.
"For people who put themselves on a pedestal and say we will do no evil and then to start dealing with China under the Chinese-dictated terms, that would undermine some of the high ground they wanted to take," said Asher Epstein, managing director of the Dingman Center for Entrepreneurship at the University of Maryland's Robert H. Smith School of Business.
Google has won kudos from privacy rights groups for fighting a Justice Department subpoena for search records it says it needs to combat online child pornography, although the case has shed light on the fact that Google retains personal information on users.
The company also has become embroiled in legal tangles with the Authors Guild and the Association of American Publishers, who have sued over Google's plan to create a digital Internet library of printed books, alleging copyright infringement. In a separate development, the World Association of Newspapers has lashed out at search engines, particularly Google, that grab news from other sites and post it online.
Google's much-watched founders, Sergey Brin and Larry Page, have been under scrutiny as well. Critics take issue with Brin, who earned a bachelor's degree in mathematics and computer science from the University of Maryland at College Park in 1993, and Page for unloading billions of dollars worth of Google stock. Investors typically want top management to hold sizable stakes in their companies, and often take insider sales of stock as a sign that something might be amiss.
"For them to say we don't care about profits, we just want to generate a growing enterprise, well, they have the luxury to do that because they've already cashed in enough chips," said Andrew M. Schroepfer, president of Tier 1 Research, an independent firm.