I found an article from back in July discussing Google's (GOOG) seeming lack of love for its shareholders. I think that this does bring up an interesting point which is that Google's management does seem a bit more interested in some of its more transformative projects than necessarily routinely providing a good return to shareholders. Say what you will about Apple (AAPL), but Steve Jobs never enters a product area without a very good idea how he's going to make money for Apple shareholders.
Google, on the other hand, has sprawled into a variety of areas that I am not sure have yielded the highest possible return on investment for investors. One of those areas is, of course, YouTube. We all love YouTube, but it is a bit of a free lunch as the advertising dollars don't even come close to covering the vast operating expenses. In total, YouTube lost something on the order of $450 million last year. Now, Google may argue that somehow owning YouTube has boosted its ad revenues by X% elsewhere and that has offset the cost. Even if that is true, and that's a big if, it still was not likely the best return on investment Google could have embarked upon at the time.
With Android, Google is winning the war against Apple with Android, which should be fantastic news for Google considering the growth of the smartphone market. However, I think this is a case of where Google management wanted to embark on a more transformative path than a lucrative one. It doesn't charge a license fee for Android, which it developed (and still develops) so it doesn't make money up front. Further, its own attempt at a phone flopped badly while Motorola (MOT) is resurrecting itself on the back on Google's labors. In the end, I am still not convinced that Google will get more ad dollars through greater usage of its search engine than it would have if it had not entered the market. After all, I think most iPhone users probably use Google's search engine.
Then there are the other projects like when Google planned on giving San Francisco free Wi-Fi, its plans to provide ultra-fast internet to a variety of US cities, a free web browser (which is awesome by the way), and so on. You add this in with not paying a dividend to shareholders despite a monstrous cash pile and you do sit there and scratch your head a bit. Since publicly traded companies have a fiduciary responsibility to try (though most fail) to earn the maximum possible return for their shareholders, I have to question whether or not Google management actually acknowledges this responsibility.
The stock price performance over the past couple years reflects that as well:
There is multiple compression in there to be sure as profit growth, despite the above mentioned problems, has been quite solid. However, this multiple compression is not just a function of a bad overall stock market, but possibly also because investors may not believe that management can continually deliver how they have in the past due to these diversions.