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Feb 27 2008 8:21AM EST

Google, IBM, and the Wall Street Funhouse

Google down; IBM up? What's the deal?

Not that this is news to anybody, but trying to get a sense of what's actually going on in a company by looking at its stock price is like trying to get a sense of a person by looking at his reflection in a funhouse mirror.

Google shares are off their highs by so much, the AP writes today that Google's "once-robust stock is looking haggard." Haggard? Well, only if you were one of the dopes who bought it at $700 a share last fall. If you bought GOOG three years ago at $200, you're still feeling pretty good. It's now about $464.

Google is not some company that landed from outer space and is immune to human economic trends. The U.S. economy is slowing. When that happens, advertising spending drops from previous levels. Google will feel that just like every other media entity. But Google, the hottest new advertising medium of the past decade, will feel it less than most. It is also still the company to beat on the Web -- perhaps the most powerful company in tech. Nothing much has changed about Google in the past few months other than bad news about the economy.

And then IBM is bouncing skyward because of one piece of news: that it will spend $15 billion buying back its own stock. That doesn't change a thing about IBM's business -- which has quietly been doing very well the past few years. If anything, the news might make you wonder whether IBM would be better off in the future if it spent the $15 billion on R&D or acquisitions instead of blatantly boosting its own stock price.

For those reasons, if you tied me down and forced me to invest for the long term in either GOOG or IBM based on what's happening today, I'd take GOOG.

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