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  • #1

    Google does it again...

    The boys keep making money hand over fist. But what about that capital expenditures line item of $700 million for one quarter? Speechless. They're getting into telephone/cable company kind of capital spending. Because of this spending, free cash flow is only ~ $150 million for the quarter.

    From the WSJ.

    Google's Earnings and Revenue Surge
    By MYLENE MANGALINDAN
    July 21, 2006; Page A3

    Google Inc.'s second-quarter profit doubled and revenue soared 77%, in an indication that the Web-search company is gaining market share and controlling costs as more advertisers shift their spending to the Internet from traditional media.
    [Sergey Brin]

    The results, which sent Google shares up nearly 1% in after-hours trading, contrasts with those of rival Yahoo Inc. earlier this week. On Tuesday, Yahoo said it would delay1 its search-advertising-system improvements, sending the company's shares down 22% on Wednesday.

    For months, Google has been walking a fine line trying to meet Wall Street's earnings expectations while ramping up spending to accommodate its global and technology expansion plans.

    Wall Street and Silicon Valley companies have been looking for a turning point at which the company will show signs of slowing revenue and profit growth, but that point doesn't yet appear to have come.

    In the latest quarter, analyst Safa Rashtchy, of Piper Jaffray & Co., said Google not only was able to control expenses, but also appears to be gaining market share against Yahoo and Microsoft Corp. "This is one of the best outcomes we could have for Google" in what is considered a slow quarter, he said.

    Google's expenses, particularly capital expenditures, have been rising as the company invests in computers, networking equipment and facilities to maintain its competitive and technological edge.
    [Eric Schmidt]

    Google's expenses rose 81% to $1.64 billion in the quarter from a year ago, in line with analysts' expectations and previous quarters. Meanwhile, the company's total costs in the first quarter rose 86% from a year ago, and last year's fourth-quarter costs rose 85% from a year earlier.

    Capital expenditures in the second quarter were $699 million, including $319 million related to real-estate purchases. The company said it expects its growth rate for capital expenditures this year will be "substantially greater" than its revenue growth rate for 2006.

    Net income was $721.1 million, or $2.33 a share, up from $342.8 million, or $1.19 a share, a year ago. Excluding certain stock-based compensation, among other things, Google earned $2.49 a share compared with analysts' forecast of $2.22, according to Thomson Financial.

    Revenue rose to $2.46 billion from $1.38 billion. Excluding commissions paid to marketing partners, revenue was $1.67 billion, above analysts' expectations of $1.65 billion.

    Google reported results after the close of regular stock-market trading. At 4 p.m. in Nasdaq Stock Market composite trading, the stock was at $387.12, down $11.88. Shares rose $2.78 to $389.90 in after-hours trading.
    [Google Graphic]

    Google continues to outpace Yahoo and Microsoft in the search-technology market world-wide. In the U.S., Google's share of Web search rose to about 48% in the second quarter through May.

    That compared to Yahoo's 31% share and Microsoft's 14%, which were flat and down. respectively, from the first quarter, according to investment-research firm Majestic Research Corp.

    Google co-founder Sergey Brin attributed the U.S. market-share gain to improvements in the relevance of the company's search service and its ease of use.

    Many analysts consider Google's search-advertising system to be superior to rivals' systems because it delivers more relevant advertising results, allowing Google to generate more revenue from those ads. Yahoo and Microsoft are investing heavily to develop search-advertising systems to compete with Google's, but have struggled to match Google's technology, say some analysts.

    Google Chief Executive Eric Schmidt said partnerships remain important as a way to increase Google's reach and distribution into different markets and areas.

    Company executives said Google's partnership with Time Warner Inc.'s America Online unit, for instance, is on track. Under that deal, which was signed in December, Google agreed to invest in AOL, and AOL agreed to use Google's search technology, with both sharing revenue from search advertising.
    I came upon a barroom full of bad Salon pictures in which men with hats on the backs of their heads were wolfing food from a counter. It was the institution of the "free lunch" I had struck. You paid for a drink and got as much as you wanted to eat. For something less than a rupee a day a man can feed himself sumptuously in San Francisco, even though he be a bankrupt. Remember this if ever you are stranded in these parts. ~ Rudyard Kipling, 1891
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  • #2
    On the other hand...

    Despite Great 2Q Results, Google Shares Fell
    CNN Money
    Google's second-quarter results were excellent, but that apparently wasn't good enough for Wall Street, which has come to expect stellar returns from the Mountain View, Calif. search company, reports CNN Money. Shares fell 6 percent yesterday following its earnings report, on concerns about the company's valuation, the possibility of increased search competition, and the usual gripe: lack of revenue diversification. Oppenheimer & Co. analyst Sasa Zorovic says Google is probably the victim of "unreasonably lofty expectations," given that the company's wow-factor continues to decline after consistently beating analysts' forecasts. "My sense is they didn't beat by enough. It's a very strong quarter, but people are still hoping that Google can blow away numbers," Zorovic says. Google's second-quarter earnings beat the consensus by about 12 percent; in the first quarter, its earnings beat estimates by 16 percent. The company posted net income of $721 million, up 110 percent from last year. Google's revenue for the quarter was $1.68 billion, up 77 percent from 2Q last year. Other analysts cited high capital expenditures as a possible reason for the dip. Google spent $700 million during the quarter, including $312 million for real-estate purchases in Mountain View. Still, Google fared a lot better than Yahoo after reporting second-quarter earnings. Yahoo had warned that third-quarter results would be lower than the Street expected, while barely meeting its earnings estimates and missing slightly on revenues. Its shares plunged 22 percent Wednesday
    Keep on Civin'
    RIP rah, Tony Bogey & Baron O

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    • #3
      That whole - growth rate of capital expenditures will be far greater than growth rate of revenues - is a bit troubling. Probably why the stock went down a bit.
      “It is no use trying to 'see through' first principles. If you see through everything, then everything is transparent. But a wholly transparent world is an invisible world. To 'see through' all things is the same as not to see.”

      ― C.S. Lewis, The Abolition of Man​

      Comment

      • #4
        That's an inaccurate article. The results were released after the bell yesterday and after-hours trading was about even. This morning, there was a fall in the price, but it is up again now.

        I agree with regard to the capital spending, of course. Can't say they didn't warn us, though. In fact, they say that the capital spending is a competitive advantage and therefore they can't really spend too much.
        I came upon a barroom full of bad Salon pictures in which men with hats on the backs of their heads were wolfing food from a counter. It was the institution of the "free lunch" I had struck. You paid for a drink and got as much as you wanted to eat. For something less than a rupee a day a man can feed himself sumptuously in San Francisco, even though he be a bankrupt. Remember this if ever you are stranded in these parts. ~ Rudyard Kipling, 1891

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        • #5
          Capital spending is only of marginal competitive advantage. The biggest advantage comes from development of more intellectual capital. It also assumes that their capital spending will be executed flawlessly. You have to like their confidence in their abilities to predict the future.
          “It is no use trying to 'see through' first principles. If you see through everything, then everything is transparent. But a wholly transparent world is an invisible world. To 'see through' all things is the same as not to see.”

          ― C.S. Lewis, The Abolition of Man​

          Comment

          • #6
            Purchases of marketable securities (17,576,067)
            Maturities and sales of marketable securities 15,856,478

            (In thousands)


            How come they bought and sold so many marketable securities?
            DISCLAIMER: the author of the above written texts does not warrant or assume any legal liability or responsibility for any offence and insult; disrespect, arrogance and related forms of demeaning behaviour; discrimination based on race, gender, age, income class, body mass, living area, political voting-record, football fan-ship and musical preference; insensitivity towards material, emotional or spiritual distress; and attempted emotional or financial black-mailing, skirt-chasing or death-threats perceived by the reader of the said written texts.

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            • #7
              I think that's the result of the secondary offering, which brought in so much cash ($10b, IIRC). Probably just money market funds.
              I came upon a barroom full of bad Salon pictures in which men with hats on the backs of their heads were wolfing food from a counter. It was the institution of the "free lunch" I had struck. You paid for a drink and got as much as you wanted to eat. For something less than a rupee a day a man can feed himself sumptuously in San Francisco, even though he be a bankrupt. Remember this if ever you are stranded in these parts. ~ Rudyard Kipling, 1891

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              • #8
                shares fell because the stock was ran in anticipation of the earnings

                it seems most stocks that ppl expect to destroy earnings drop off after earnings are released

                I think it's because mutual funds time their trades on quarterly earning releases or something
                Monkey!!!

                Comment

                • #9
                  Interesting to note that Google is quickly becoming a capital spender on par with the telephone companies (Verizon spends about $4 billion a quarter). Amazing that this has happened in only 8 years.
                  I came upon a barroom full of bad Salon pictures in which men with hats on the backs of their heads were wolfing food from a counter. It was the institution of the "free lunch" I had struck. You paid for a drink and got as much as you wanted to eat. For something less than a rupee a day a man can feed himself sumptuously in San Francisco, even though he be a bankrupt. Remember this if ever you are stranded in these parts. ~ Rudyard Kipling, 1891

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                  • #10
                    And this is partly why the telephone companies have low to negative profits.
                    “It is no use trying to 'see through' first principles. If you see through everything, then everything is transparent. But a wholly transparent world is an invisible world. To 'see through' all things is the same as not to see.”

                    ― C.S. Lewis, The Abolition of Man​

                    Comment

                    • #11
                      Profits for some are fine. Verizon makes about $7 billion a year. Bell South makes about $4 billion a year. SBC/AT&T makes about $5 billion a year. Qwest is the only negative.

                      Of course, Google is approaching these profit figures, with about 1/10th the revenue.
                      Last edited by DanS; July 25, 2006, 16:01.
                      I came upon a barroom full of bad Salon pictures in which men with hats on the backs of their heads were wolfing food from a counter. It was the institution of the "free lunch" I had struck. You paid for a drink and got as much as you wanted to eat. For something less than a rupee a day a man can feed himself sumptuously in San Francisco, even though he be a bankrupt. Remember this if ever you are stranded in these parts. ~ Rudyard Kipling, 1891

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                      • #12
                        It's all relative

                        Their margins are very slim compared to Google. Being a big capital spender is moving Google towards the Telcos.
                        “It is no use trying to 'see through' first principles. If you see through everything, then everything is transparent. But a wholly transparent world is an invisible world. To 'see through' all things is the same as not to see.”

                        ― C.S. Lewis, The Abolition of Man​

                        Comment

                        • #13
                          I cross-edited you. Of course, necessarily you are correct. Capital spending has to be depreciated some time.
                          I came upon a barroom full of bad Salon pictures in which men with hats on the backs of their heads were wolfing food from a counter. It was the institution of the "free lunch" I had struck. You paid for a drink and got as much as you wanted to eat. For something less than a rupee a day a man can feed himself sumptuously in San Francisco, even though he be a bankrupt. Remember this if ever you are stranded in these parts. ~ Rudyard Kipling, 1891

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                          • #14
                            you mean you DanS'd him
                            Monkey!!!

                            Comment

                            • #15
                              And computer equipment should really be deprecited over a 3 year time frame.
                              “It is no use trying to 'see through' first principles. If you see through everything, then everything is transparent. But a wholly transparent world is an invisible world. To 'see through' all things is the same as not to see.”

                              ― C.S. Lewis, The Abolition of Man​

                              Comment

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