Time to Sell Apple, Google, Other 'Tech' Stalwarts?
Long story, short, Thiel argued that investment among many tech companies, particularly Google, has dried up:
Google also has 30, 40, 50 billion in cash. It has no idea how to invest that money in technology effectively. So, it prefers getting zero percent interest from Mr. Bernanke, effectively the cash sort of gets burned away over time through inflation, because there are no ideas that Google has how to spend money.
Thiel went on to contend that tech companies hesitate to return cash (or a greater share of their cash to shareholders) because doing would signal that they're no longer tech companies.
Initially, Schmidt responded by doing the psychologically predictable: He blamed a whole host of external forces for Google's lack of "effective" investment, particularly macropolitical issues such as globalization and education.
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Thiel promptly set that weak response straight, noting that "the intellectually honest thing to do would be to say that Google is no longer a technology company, that it's basically -- it's a search engine."
To his credit, Schmidt pointed out that Thiel overlooks innovation at Google, citing Chrome as the top browser in the world and the company's work in enterprise.
Because Schmidt was able to pick himself up from off of the mat, Thiel stopped short of scoring a knockout. His overarching point still looms large. Or at least it should.
For the record, I do not know Thiel. In this article, I take his comments and extend them with my own thoughts. I'm not sure if he agrees or disagrees with my extrapolations.
Who Are the Real Innovators?
For months, I have taken Sirius XM(SIRI) CEO Mel Karmazin to task for his attitude toward his company's cash.
In April, I wrote an article for TheStreet highlighting comments Karmazin made to Jim Cramer. You can link to Cramer's interview from my article, but, in a nutshell, Karmazin provides a case study for Thiel's hypothesis.