Google To Join The S&P 500
Google Inc.'s stock will be added to the Standard & Poor's 500 index, a long-anticipated rite of passage that lifted the online search engine leader's recently sagging shares.
Standard & Poor's announced the forthcoming change after the stock market closed Thursday. Google will replace Burlington Resources Inc. in the closely watched barometer on March 31. Burlington Resources, a major oil producer based in Houston, is being acquired by ConocoPhillips Inc. in a deal worth about $35.6 billion.
Google's shares gained $1.67 to close at $341.89 on the Nasdaq Stock Market, then soared $30.82, or 9 percent, in extended trading.
Before Thursday's announcement, Google's market value had dropped by nearly 20 percent so far this year, wiping out about $20 billion in shareholder wealth amid concerns about slowing earnings growth and questions about its often cryptic communications with Wall Street.
The inclusion into the S&P 500 provides Google's stock with an immediate catalyst, because so many large mutual funds are based on the index's composition. Once a stock is added to the index, money managers typically have to buy shares as they readjust their portfolios.
Joining the S&P 500 also is a symbol of prestige that stamps its members as a blue-chip company.
Google's entrance into the elite club had been considered a foregone conclusion by many because its market value had already surpassed many of the nation's best-known companies like General Motors Corp. and Hewlett Packard Co., both components of the even more exclusive Dow Jones industrial average.
Despite its stock's recent downturn, Google's market value has remained above $100 billion.
On Tuesday, Google unveiled its new finance section, furthering the philosophical shift that's turning its once-pure Internet search engine into an all-purpose Web site that seems increasingly interested in getting people to stick around instead of sending them elsewhere.
The evolution has been unfolding during the past four years as Google has introduced free e-mail, news, photo sharing, instant messaging, shopping and mapping services that are staples of one-stop Web sites commonly known as "portals."
The changes have sparked a debate about whether Google is moving wisely to counteract its biggest rivals, longtime Web portals like Yahoo and Microsoft's MSN, or overextending itself in a way that ultimately will diminish the appeal of its Internet-leading search engine.
"There have been concerns that Google is doing just about everything these days but focusing on search," said Danny Sullivan, editor of Search Engine Watch, a closely watched industry newsletter.
Although Google dislikes being described as a portal, Sullivan and industry analysts said its new finance section leaves little doubt where the company is headed.
"They are being fairly careful about it, but they are walking very rapidly toward becoming a portal," said Forrester Research analyst Charlene Li. "They have a lot of other services gunning for them, so they have become most keen about building user loyalty so the users don't have a reason to go someplace else."
By keeping visitors on its site longer, Google gets more chances to serve up the ads that account for virtually all of its profits — although for now, at least, Google doesn't plan to show ads on its finance section.
Finance emerged as one of Yahoo's first specialty sections when the Sunnyvale-Calif.-based company decided to diversify beyond Internet search and began packaging content on its own Web site.
Yahoo's finance section, introduced a decade ago, has turned into one of the company's most powerful traffic magnets. The 31.4 million people who came to Yahoo Finance last month spent an average of 54 minutes per visit on the site, according to comScore Media Metrix.
Google's expansion already has caused some people to draw cautionary comparisons to AltaVista, a pioneering Web search engine that set out to build a more diversified portal in the 1990s.
The expansion alienated AltaVista's once-loyal users as its search results deteriorated, creating an opportunity for upstarts like Google. AltaVista eventually was sold and its technology is now part of Yahoo's effort to overtake Google in search.
"You wouldn't think it would be possible for Google to repeat the same mistakes" as AltaVista, Sullivan said. "You would think Google would remember that one of the reasons it exists is because of the dumb things other people once did."