3 Companies Google Should Spin Off After YouTube

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The HBO Go
spinoff rumor
inspired one analyst to ponder the value of another video giant: YouTube. Sean Udall, CIO of Quantum Trading Strategies and author of The TechStrat Report, told Benzinga that the site could be worth as much as
$40 billion
without
Google IncGOOG
. "I think the first thing is you just do YouTube and you let it be out there and you let it trade," said Udall. "Then shareholders with Google have at least two trading vehicles. You never wanna try and go spin-out too many things at once." Udall defended the idea of a Google spin-out by pointing to the various success stories at
Hewlett-Packard CompanyHPQ
, which spun out
Agilent Technologies IncA
. "Hewlett-Packard spun out Agilent Technologies," said Udall. "Way, way back when, Agilent spun out two or three companies." One of them was
Avago Technologies LtdAVGO
. "You look at Avago today, it's a $30 billion company…as its own standalone entity," Udall added. "HP's total market cap is only $62 billion today. Agilent just split into two companies, but [its] market cap today is $14 billion."

Related Link: 'Undervalued' HBO Would Be 'Fantastic' Without Time Warner

Udall said that Avago was "once a small stub," but it is now worth "half of Hewlett-Packard and worth more than double what Agilent is today." "Might YouTube be worth this huge amount of money someday?" Udall questioned. "Well, you don't know unless you spin it out. If it stays with Google, it's hard to see the value as clearly." This is all speculation, but in the event that Google decides to spinoff one or more entities, Udall has formed a list of probable candidates:

1. Google Ventures

"I could make a case that…Google's venture capital arm could be a standalone entity," said Udall. "That's been super, super successful. That's the arm where they basically feed a lot of the top…emerging growth companies. They have had a tremendous hit record for a standalone VC funding shop."

2. Android

Udall is on the fence about this one, but suggested that Android "could" be a good spinout. "I'm not sure how great of an asset that's gonna look in the future," he said. "Android/mobile division might be a decent piece to spinout."
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3. Google Docs

Finally, Udall turned to Google's enterprise business, which he thinks could be worth a lot of money as a standalone company. "The way I would view it as, you've got Google Docs, Google Cloud Storage -- effectively the Google business that competes with Amazon Web Services," said Udall. "They could go gangbusters in that business. They have a pretty strong, a pretty good enterprise business." Udall said he could argue that this package would be a "pretty powerful spin-out." "I'd be shocked if it wouldn't be worth $5 to $10 billion, and maybe more than that," he added.

Better Together Than Apart?

Some investors may question Google's survival if it spins out all of its divisions, but Udall isn't worried. He doesn't think the core search business would be affected. "The only thing that I think is ever going to hurt Google search would be Apple search -- if Apple ever does launch it," Udall concluded. Disclosure:
At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.
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Posted In: TechAgilent TechnologiesAppleavagoGoogleGoogle DocsSean UdallYouTube
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