S&P Equity Research predicts big developments for the Internet segment in 2011, including continuing challenges for Google (Nasdaq: GOOG), changes at Yahoo! (Nasdaq: YHOO), and a cloud offering from Apple (Nasdaq: AAPL).
"The coming year should also be another year of solid growth, with double-digit gains for U.S. Internet advertising and retail spending," said Scott Kessler, Information Technology analyst at S&P Equity Research.
Kessler expects notable M&A actions in the Internet segment. Not only will Google remain active, but he foresees international companies looking for franchise brands and businesses, perhaps of publicly traded companies.
Following are S&P's company-specific predictions for the Internet industry for 2011:
- Kessler predicts that Yahoo! will engage in at least one significant transaction, possibly with a sale of its stake in Alibaba Group, a reduction of its interest in Yahoo! Japan, and a material acquisition.
- S&P predicts Google to experience further issues in China, perhaps related to the registration and operation of Google Maps. Google's continuing string of regulatory and legal woes will include a significant penalty or loss in 2011, potentially related to the Department of Justice blocking its proposed acquisition of ITA Software, Oracle's (Nasdaq: ORCL) intellectual-property claims involving Android, and/or continuing state and sovereign inquiries related to the company's Street View feature of Google Maps.
- Kessler also predicts that Apple will bring iTunes to "the cloud," allowing customers to access their music and video files using the Internet, and to wirelessly sync iTunes with compatible devices.
- The number of PayPal accounts -- 90.5 million as of the end of the third quarter -- will exceed the number of active eBay users (93.2 million). eBay (Nasdaq: EBAY) could move to better monetize its payments business, perhaps via an IPO of PayPal, Kessler believes.
- Despite the IPO market warming up somewhat in the second half of 2010, Kessler says major social-media companies like Facebook, Twitter, and LinkedIn are in no rush to become publicly traded entities.
- Kessler expects Amazon.com (Nasdaq: AMZN) to continue to be among the biggest beneficiaries of consumers making more purchases online, and he projects its sixth straight year of revenue growth of greater than 25%.
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