What Could Google Buy with $42.6 Billion? Plenty!

Shares of Google rose smartly Friday after reporting blow-out third quarter earnings that rose nearly 26 percent, way ahead of estimates. In late trading, they were at $591.76, only 8 percent below their July 52-week high.

That's not bad for the 13-year-old Mountain View, Calif.-based company that grew out of the fertile minds of Stanford University graduate students Larry Page, now CEO, and Sergey Brin.

Analysts like Youssef Squali of Jefferies have boosted their price targets for Google to a resounding $850.

One item not closely watched when Google reported earnings was its cash pile, now $42.6 billion, down from $50.1 billion on Dec. 31.

What will Google buy with all that cash? Here are some suggestions:

Finish buying Motorola Mobility. In August, Google announced plans to acquire Motorola Mobility, the smartphone and consumer electronics spinoff of the old Motorola. The price: $12.5 billion, Google's most expensive purchase.

The date for Motorola Mobility shareholders to vote on the takeover is Nov. 17. Since the directors and big shareholders like Carl Icahn approve, the measure will pass. Not clear: approvals by the U.S. government and European Commission, both of which are exploring Google's power in search and media.

Consider Netflix. Having bought YouTube for $1.65 billion in 2006, Google already has the knack for streaming media and slipping in compelling advertising.

Now that Netflix is in trouble solely due to its own executive mismanagement, buying the Los Gatos, Calif.-based entertainment site might bolster Google's entertainment presence and make it more formidable against bitter rival Apple, as well as Amazon, Hulu and other sites.

Netflix is a lot cheaper than before its August subscriber fee hikes that created friction. Its market capitalization is still a hefty $6.5 billion and its enterprise value $6 billion, remarkable considering the management mess-up.

Look at Akamai: That's a manager in the media management sector. Akamai, based in Cambridge, Mass., would be cheaper than Netflix and keep Google in the business-to-business sector.

The tab would be at least $4.5 billion in market capitalization and $4 billion in enterprise value.

Buy more network support companies like Rackable or Level 3. Google spends fortunes to support its computer backbone with worldwide server farms and huge installations in remote locations. Acquiring some pure-play backbone companies might make the job easier.

Candidates could include Level 3 Communications, based in Broomfield, Colo., which also supports voice-over-Internet-protocol (VOIP) communications, which might be helpful now that Microsoft has finally acquired Skype. The market capitalization is $2.98 billion and enterprise value a fat $9.84 billion.

Two more are Limelight Networks, based in Tempe, Ariz., valued around $324 million, with enterprise value of $220 million, and Rackspace Hosting, of San Antonio, valued around $5.2 billion, with enterprise value of $5.14 billion.

Keep tabs on specialty players that add value. Last quarter, Google acquired Zagat, the New York restaurant reviewer, for a reported $200 million. That boosted Google against Apple, Yahoo and Yelp.

Google also bought ITA Software, the travel specialist, for $700 million, which strengthened it against Microsoft, Expedia and Priceline.

There are dozens of smaller sites, book publishers and game companies that might fit into Google. A small universe of business analytics and database companies is around, as well.

With $42.6 billion, let's hope any future buys will be strategic and judicious.