Google Parent Alphabet Reports Strong Results on Mobile Ads, YouTube, Other Bets

Google Parent Alphabet Reports Strong Results on Mobile Ads, YouTube, Other Bets

Google’s parent company Alphabet on Thursday reported profit in the recently-ended quarter leapt as money poured in from ads delivered to mobile devices and returns improved on “other bets.”

Alphabet profit was up 32.4 percent to $6.7 billion (roughly Rs. 43,555 crores) on in the quarter on revenue that increased 24 percent to $27.8 billion (roughly Rs. 1,80,724 crores), up 24 percent from the same period a year earlier.

Chief financial officer Ruth Porat credited “strength across Google and Other Bets.”

The earnings topped market expectations, and Alphabet shares jumped in after-market trade on the Nasdaq exchange before concerns about growing expenses apparently caused them to settle back a bit to be up nearly 3 percent to $1,021.

“It is what everybody looks at every time: what is going on with expenses?” independent analyst Rob Enderle told AFP.

“For the most part they seem to be well managed, but you watch to make sure they remember they still have limits even though they are printing money.”

While mobile ads were a main area of growth, they brought with them higher traffic acquisition costs, pushing up Google expenses in a trend seen as unavoidable.

Investing in cloud services and artificial intelligence also means spending more on data centers to provide the massive computing power involved.

“I’ve been really proud of the progress this quarter; launching popular new products and continuing to grow our business in new areas,” Google chief executive Sundar Pichai said in an earnings call with analysts.

“It’s been particularly exciting to see our early bet on artificial intelligence pay off and go from a research project to something that can solve new problems for 1 billion people a day.”

YouTube continued to see “phenomenal growth” with more than 1.5 billion people spending an average of an hour a day watching videos there on mobile devices, and surging use on television screens in homes, according to Pichai.

He boasted of progress winning businesses over to Google services hosted in the internet cloud, where the company competes with Amazon and Microsoft in that market.

Pichai also said that opening day pre-orders for recently unveiled Pixel 2 smartphones were double that seen for the first-generation Pixel.

Google is “seriously committed to making hardware” as well as working with partners such as South Korean consumer electronics giant Samsung which is a major producer of smartphones powered by Android software made available free by the US Internet company.

“The intersection of hardware and software is how you drive computing forward,” Pichai said.

“I think it’s important we thoughtfully put our opinion forward.”

Smartphones and other devices “made by Google” can showcase the potential of its Android and Chrome software, setting a bar for partners.

Moonshots
A corporate reorganisation started two years ago created Alphabet, which has holdings including cash-engine Google and ventures devoted to innovative “moonshots” such as Waymo self-driving car unit and a Loon project for delivering internet service from high-altitude balloons.

Subsidiaries other than Google were put into an “other bets” group which saw revenue in the quarter rise to $302 million (roughly Rs. 1,963 crores) from $197 million (roughly Rs. 1,280 crores) during the same three-month period last year.

Google ads accounted for the bulk of Alphabet revenue, contributing $27.47 billion (roughly Rs. 1,80,369 crores), according to the earnings release.

Alphabet earlier this year spun off a little-known unit working on geothermal power called Dandelion, which will begin offering residential energy services.

Dandelion chief executive Kathy Hannun said her team had been working for several years “to make it easier and more affordable to heat and cool homes with the clean, free, abundant, and renewable energy source right under our feet,” and that the efforts culminated in the creation of an independent company outside of Alphabet.

Meanwhile, Alphabet’s life sciences unit Verily announced a study to track people for years, right down to their genetics, in a quest for insights into staying healthy.

Alphabet also owns Nest, which recently expanded its line-up of smart home devices to include a security system.

Nest, Fiber, and Verily were said to be top performing other bets in the quarter.

Waymo on Thursday announced plans to begin testing self-driving cars in notoriously troublesome ice and snow conditions in the US state of Michigan this winter.

[“Source-gadgets.ndtv”]

Google Parent Alphabet Profit Surges on Mobile, Video Ads

Google Parent Alphabet Profit Surges on Mobile, Video Ads

HIGHLIGHTS

  • Alphabet’s net income climbed 27 percent to $5.06 billion
  • Google is competing with Facebook for dominance in mobile advertising
  • Advertising accounted for 89.1 percent of Google’s total revenue

Google parent Alphabet Inc bested analysts’ estimates for third-quarter profit and revenue on Thursday as the search company showed it has honed its core business for the mobile era and is closing in on the next wave of computing.

Propelled by strong advertising on mobile devices and video site YouTube, Alphabet’s net income climbed 27 percent to $5.06 billion (roughly Rs. 33,839 crores). Revenue jumped 20 percent to $22.45 billion (roughly Rs. 1,50,147 crores), marking the search giant’s seventh straight quarter of double-digit revenue growth.

(Also see: Google Pixel XL Review)

The company authorized a $7 billion repurchase of its Class C stock, pleasing investors who had been craving more after a $5 billion repurchase last year.

Google is competing fiercely with social network Facebook for dominance in the fast-growing mobile advertising market. Google Chief Executive Sundar Pichai touted the company’s gains in the space, and was bullish about recent product launches such as the Google Assistant, the Google Home smart speaker and refinements to the enterprise cloud business.

The products are aimed at the rise of voice search, which many analysts believe will succeed keyboards and touch screens as a primary way users interact with devices.(Also see: Google Assistant Goes Head to Head With Apple’s Siri in Comparison Video)

“We feel well positioned as we transition to a new era of computing,” Pichai said in an conference call. “This new era is one in which people will experience computing more naturally and seamlessly in the context of their lives, powered by intelligent assistants and the cloud.”

Shares of Alphabet, the world’s No. 2 company by market value, were up 1.6 percent in after-hours trading.

The company posted third-quarter adjusted earnings per share of $9.06, beating expectations of $8.63 a share on revenues of $22.05 billion, according to Thomson Reuters estimates.

Google has been dogged by concerns about how it would nudge its vast web advertising business towards mobile, but the company’s recent performance has reassured Wall Street that the transition is well underway, said analyst Colin Gillis of BGC Partners.

“It’s showing that even though they’ve hit lifetime highs, there’s still room to run,” he said.

Advertising revenue, the company’s lifeblood, rose 18.1 percent to $19.82 billion (roughly Rs. 1,32,543 crores) in the third quarter. Paid clicks, or ads for which advertisers pay only when users click on them, rose 33 percent, compared with a rise of 29 percent in the second quarter.

Cost-per-click, or the average amount advertisers pay Google, fell 11 percent in the latest period, but investors are willing to forgive the slump, for now, as it suggests strong mobile growth, said analyst Kerry Rice of Needham & Co.

YouTube continued to post robust gains, Pichai said. Over the past year, Google, Facebook and Twitter Inc have all doubled down on video, a format where advertisers are willing to pay a premium for a few seconds of users’ undivided attention.

Advertising accounted for 89.1 percent of Google’s total revenue in the quarter, and analysts are eager for the company to tap new sources of growth.

One of the leading contenders is Google’s cloud business, which drove a 38.8 percent rise in the company’s “other revenue.”

“As we head into 2017, I expect cloud to be one of our largest areas of investment,” Pichai said.

A relatively late entrant to the cloud business, Google is trying to steal market share from industry leaders Amazon.com and Microsoft. Amazon on Thursday reported a 55 percent revenue increase in its cloud business.

“I would hesitate to say they are competing head-to-head, but they are making up for lost ground,” Rice said.

Alphabet’s “Other Bets” unit generated revenue of $197 million, primarily from Nest, Google Fiber and Verily units, Chief Financial Officer Ruth Porat said during the call.

(Also see: Google Fiber Halts Expansion Plans as Chief Steps Down)

Alphabet said this week it was pausing the rollout of Fiber, a high-speed internet service, in some US cities and that its leader, Craig Barratt, would leave.

Porat played down analysts’ concerns of instability at Other Bets, which has suffered a wave of executive departures, including Nest founder Tony Fadell, self-driving car technology chief Chris Urmson and, most recently, Barratt.

“As we reach for moonshots that will have a big impact in the longer term, it’s inevitable that there will be course corrections along the way, and that some efforts will be more successful than others,” Porat said.

Other Bets, which also includes research unit X, reported an operating loss of $865 million, down from a year-ago loss of $980 million. The narrowing loss suggests Porat is instilling the financial discipline investors have long hoped to see from the company, said Gillis.

“Everybody loves Ruth,” he said.

© Thomson Reuters 2016

Tags: Google, Alphabet Inc, Alphabet Earnings, Cloud, Sundar Pichai, Internet, Android, Apps, Mobiles, PC, Laptops, Wearables
[“Source-Gadgets”]

Google Parent Alphabet Profit Surges on Mobile, Video Ads

Google Parent Alphabet Profit Surges on Mobile, Video Ads

HIGHLIGHTS

  • Alphabet’s net income climbed 27 percent to $5.06 billion
  • Google is competing with Facebook for dominance in mobile advertising
  • Advertising accounted for 89.1 percent of Google’s total revenue

Google parent Alphabet Inc bested analysts’ estimates for third-quarter profit and revenue on Thursday as the search company showed it has honed its core business for the mobile era and is closing in on the next wave of computing.

Propelled by strong advertising on mobile devices and video site YouTube, Alphabet’s net income climbed 27 percent to $5.06 billion (roughly Rs. 33,839 crores). Revenue jumped 20 percent to $22.45 billion (roughly Rs. 1,50,147 crores), marking the search giant’s seventh straight quarter of double-digit revenue growth.

(Also see: Google Pixel XL Review)

The company authorized a $7 billion repurchase of its Class C stock, pleasing investors who had been craving more after a $5 billion repurchase last year.

Google is competing fiercely with social network Facebook for dominance in the fast-growing mobile advertising market. Google Chief Executive Sundar Pichai touted the company’s gains in the space, and was bullish about recent product launches such as the Google Assistant, the Google Home smart speaker and refinements to the enterprise cloud business.

The products are aimed at the rise of voice search, which many analysts believe will succeed keyboards and touch screens as a primary way users interact with devices.(Also see: Google Assistant Goes Head to Head With Apple’s Siri in Comparison Video)

“We feel well positioned as we transition to a new era of computing,” Pichai said in an conference call. “This new era is one in which people will experience computing more naturally and seamlessly in the context of their lives, powered by intelligent assistants and the cloud.”

Shares of Alphabet, the world’s No. 2 company by market value, were up 1.6 percent in after-hours trading.

The company posted third-quarter adjusted earnings per share of $9.06, beating expectations of $8.63 a share on revenues of $22.05 billion, according to Thomson Reuters estimates.

Google has been dogged by concerns about how it would nudge its vast web advertising business towards mobile, but the company’s recent performance has reassured Wall Street that the transition is well underway, said analyst Colin Gillis of BGC Partners.

“It’s showing that even though they’ve hit lifetime highs, there’s still room to run,” he said.

Advertising revenue, the company’s lifeblood, rose 18.1 percent to $19.82 billion (roughly Rs. 1,32,543 crores) in the third quarter. Paid clicks, or ads for which advertisers pay only when users click on them, rose 33 percent, compared with a rise of 29 percent in the second quarter.

Cost-per-click, or the average amount advertisers pay Google, fell 11 percent in the latest period, but investors are willing to forgive the slump, for now, as it suggests strong mobile growth, said analyst Kerry Rice of Needham & Co.

YouTube continued to post robust gains, Pichai said. Over the past year, Google, Facebook and Twitter Inc have all doubled down on video, a format where advertisers are willing to pay a premium for a few seconds of users’ undivided attention.

Advertising accounted for 89.1 percent of Google’s total revenue in the quarter, and analysts are eager for the company to tap new sources of growth.

One of the leading contenders is Google’s cloud business, which drove a 38.8 percent rise in the company’s “other revenue.”

“As we head into 2017, I expect cloud to be one of our largest areas of investment,” Pichai said.

A relatively late entrant to the cloud business, Google is trying to steal market share from industry leaders Amazon.com and Microsoft. Amazon on Thursday reported a 55 percent revenue increase in its cloud business.

“I would hesitate to say they are competing head-to-head, but they are making up for lost ground,” Rice said.

Alphabet’s “Other Bets” unit generated revenue of $197 million, primarily from Nest, Google Fiber and Verily units, Chief Financial Officer Ruth Porat said during the call.

(Also see: Google Fiber Halts Expansion Plans as Chief Steps Down)

Alphabet said this week it was pausing the rollout of Fiber, a high-speed internet service, in some US cities and that its leader, Craig Barratt, would leave.

Porat played down analysts’ concerns of instability at Other Bets, which has suffered a wave of executive departures, including Nest founder Tony Fadell, self-driving car technology chief Chris Urmson and, most recently, Barratt.

“As we reach for moonshots that will have a big impact in the longer term, it’s inevitable that there will be course corrections along the way, and that some efforts will be more successful than others,” Porat said.

Other Bets, which also includes research unit X, reported an operating loss of $865 million, down from a year-ago loss of $980 million. The narrowing loss suggests Porat is instilling the financial discipline investors have long hoped to see from the company, said Gillis.

“Everybody loves Ruth,” he said.

© Thomson Reuters 2016

Tags: Google, Alphabet Inc, Alphabet Earnings, Cloud, Sundar Pichai, Internet, Android, Apps, Mobiles, PC, Laptops, Wearables
[“Source-Gadgets”]

Alphabet, Facebook Seen Acquiring More as Startup Valuations Sag

Alphabet, Facebook Seen Acquiring More as Startup Valuations Sag

David Drummond has a simple explanation for why Alphabet Inc., one of the more acquisitive technology companies, has been sitting on its hands for more than a year.

“Have you seen the valuations?” Drummond, the corporate development chief for Google’s parent company, said in an interview after the Alphabet annual shareholder meeting June 8.

That’s about to change as stratospheric startup valuations fall to earth, luring Alphabet and other big technology companies back into the market for mergers and acquisitions and forcing startup founders and investors to take offers more seriously.

“You are seeing changes in the valuations of unicorns and decacorns,” Drummond said, referring to startups worth more than $1 billion and $10 billion respectively. “It’s not all up and to the right now.”

Veteran Silicon Valley executive Meg Whitman feels the same. After focusing on a company reorganization, the chief executive officer of Hewlett Packard Enterprise Co. said she’s ready to buy because startup “valuations will be more reasonable.”

Apple CEO Tim Cook said in late April that the iPhone maker “would definitely buy something larger than we’ve bought thus far.” Salesforce.com Inc. CEO Marc Benioff said this M&A season “is the most intense, most exciting I’ve ever seen.”

Big US technology companies accumulated mountains of cash for years and often use acquisitions to bring in talent or expand into new businesses. The 360 technology and telecommunications companies in the Russell 3000 Index hold a combined $870.2 billion, the most in at least 16 quarters, according to data compiled by Bloomberg. But a flood of money from venture capital firms, hedge funds and mutual funds in recent years pushed startup valuations beyond what many public acquirers were willing to pay.

Annual US VC funding more than doubled to $63 billion from 2013 through 2015. That pushed the median valuation of startup financing rounds to $68 million in the third quarter of 2015 from $17 million at the start of 2013, venture capitalist Mark Suster estimates. The unicorn herd has grown from 13 at the start of 2013 to more than 150, according to research firm CB Insights.

“For the last three to four years a lot of public companies stood back and watched all the drama and bubble, bubble, bubble in Silicon Valley,” said Marc Andreessen, co-founder of venture capital firm Andreessen Horowitz. “There were a lot of deals that should have happened that just didn’t.” Alphabet has made less than $300 million in acquisitions so far this year and the number for 2015 was $380 million.

From 2011 through 2014, the company then known as Google Inc. averaged more than $5 billion worth of deals a year. After spending more than $20 billion on acquisitions of WhatsApp and Oculus in 2014, Facebook’s deal-making has focused on much smaller targets, according to data compiled by Bloomberg.

The $18 billion purchase of revenue-light WhatsApp and a failed Facebook attempt to buy Snapchat for $3 billion in 2013 emboldened other startup founders and backers to ask for high prices when discussing potential acquisitions, according to investment bankers and corporate M&A executives. Some Google executives started jokingly measuring unicorn valuations based on multiples of Snapchat, because there were few serious ways to value expensive startups with little or no revenue.

So a startup might be 2x Snapchat, or $6 billion, or 3x SC, according to a former Google executive, who didn’t want to be identified discussing internal M&A strategy. An Alphabet spokeswoman declined to comment.

But capital has begun to flow more slowly to startups now and valuations are falling. In the first quarter, there were 14 down rounds or exits below the previous financing valuations. In the fourth quarter of 2015, there were 16. That compares to six and seven such events in the previous two quarters, according to CB Insights.

Jawbone, Foursquare and DoorDash were notable down rounds in the first quarter. Gilt Groupe, once worth more than $1 billion, sold to Hudson’s Bay Co. for $250 million earlier this year. Yodle, once valued at $600 million, was purchased for half that in February. Good Technology sold for $425 million in September, after getting a $1.1 billion valuation previously. This year, mutual funds including Fidelity Investments and T. Rowe Price marked down the value of their holdings in startups such as Hootsuite Media, Dropbox, CloudFlare, Cloudera, DocuSign and Zenefits.

This hasn’t sparked a rash of acquisitions of startups yet because valuations only truly reset when new financing events happen. This is a contrast to public equity markets, where technology company stocks trade every second and valuations have already dropped enough to trigger an M&A revival.

LinkedIn Corp. lost almost half its market value in the first quarter, luring Microsoft Corp. on June 13 tooffer $26.2 billion for the professional network, its largest acquisition ever. Despite a big premium, the per-share price was 24 percent below LinkedIn’s 52-week high. “For the public companies the adjustment has happened. For private companies, it’s just beginning,” said Byron Deeter, a partner at Bessemer Venture Partners, which has backed startups including LinkedIn, Pinterest, Blue Apron and Yodle. He expects Google, Facebook, Alibaba Group Holding Ltd., Salesforce, Adobe Systems Inc., International Business Machines Corp. and Microsoft to be “very aggressive” acquirers.

More than 60 percent of unicorns, including WeWork, BuzzFeed, Domo and Credit Karma, will probably need to raise another round of capital during the next three quarters, CB Insights estimates. That may crystallize lower valuations, bringing them closer to public market rivals, Deeter said, citing Dropbox and Box Inc. as an example.

Box shares trade in the public market at about 4.4 times sales, according to data compiled by Bloomberg. Dropbox was valued at $10 billion, or about 25 times estimated 2014 sales of $400 million, when it raised money from investors including T. Rowe Price that year, according to CB Insights analysis. By early 2016, T. Rowe Price had cut its valuation of Dropbox by more than 50 percent, suggesting it is worth less than $5 billion. Revenue has grown since 2014, so the startup likely has a multiple from 5 to 10 times sales now. That’s still a premium to Box, but a lot closer.

Falling valuations present startup founders with difficult choices: They will have to reduce their cash burn and try to grow to earn back a richer valuation, accept a down round or complex, onerous new financing terms, or consider acquisition offers, Deeter explained. “There’s been a little denial, just like at the start of drug addiction treatment programs,” he said. “Now we’re rolling into the coping-and-reaction phase. For some, the best option may be entering into M&A discussions.”

Big companies in the tech industry are getting a higher volume of interest from venture capitalists who’d like to see their startups bought, according to the CEO of a large public company who asked not to be identified. An M&A executive at another big US technology company has had at least four exploratory meetings with founders of late-stage startups in recent months. Before this year, initial asking prices were too high to even get in the door, said the person, who asked not to be identified because the meetings were private.

Andreessen, whose firm has backed startups including Foursquare, Oculus and Facebook, said he tries to get startups to a position where they’re the buyers, not the targets. But sometimes companies make offers that are a good strategic fit, he added. “Public companies have piled up a lot of cash and they have to go shopping. There will be a whole run of M&A this year and next year,” he said.

© 2016 Bloomberg L.P.

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Tags: Alphabet, Apps, Facebook, Google, Internet, LinkedIn, Microsoft, Mobiles, Oculus, Science, Social, Tablets
[“Source-Gadgets”]