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Android activations have hit 350,000 units a day.  (Source: New York Daily News)

Android is now the world's most popular OS. But concerns remain about Google's new CEO and its recent spending increases.  (Source: Mission Geek)
Android is outselling everybody, but the investors are disgruntled

It was a tale of mixed news for search and smartphones giant Google Inc. (GOOG) with yesterday's earnings report.  The company reported its Q1 2011 calendar quarter earnings [press release] and while there's cause for optimism, investors seemed to almost unanimously feel that the bad outweighed the good.

I. The Good News -- Great Growth

The good news was that Google continues to beat analyst earnings expectations.  It recorded first quarter revenue of $8.58B USD, well above the average analyst prediction.  That represents a terrific 27 percent year-to-year growth.

Video ads on YouTube appear to be at last increasing revenue and paid ad-clicks over all recorded a nice 18 percent raise.

And in the conference call on the earnings, Google's Jeff Huber reported that the company's smart phone OS, Android, continues on its prodigious growth pace.  The OS is now recording 350K activations per day.  Not long ago it was a big deal when Android hit 100K activations per day (May 2010) and 200K activations a day (September 2010).

To top off the good news, Android users now have 3 billion apps installed on their smart phones, a testament to the success of Google's Android Marketplace, which today has over 200,000 apps.

II. The Bad News -- Leadership Concerns, Rampant Spending

But the "bad" news, as far as investors were concerned, was Google's elevated spending pace.  One big spending spot was the workforce.  Google went on a spending spree, growing its workforce 28 percent.

And Google also gave all its employees a raise last year.

This year, it says it will hire 6,000 more employees (it hired 2,000 in Q1 2011) and raise pay, on average, another 10 percent.

The company also spent a lot of money giving its various departments more funding.  It also picked up its pace of acquisitions, something that's expected to continue as the company tries to fortify its social networking, music, and mobile businesses.

Investors are also concerned about new CEO Larry Page,who assumed the post on April 4.  While lauded as a visionary who likely will slash bureaucracy, some wonder if he will offer the same quality of communication that 10-year veteran Eric Schmidt -- someone viewed as more of a businessman -- offered.

III. Investor Reaction

The company's investors were off put that Mr. Page only came on the earnings call for a few minutes and failed to deliver a detailed roadmap of his plans for the company.  In an interview with Reuters, Jim Tierney, chief investment officer of asset manager WP Stewart, an investment house that holds a significant number of Google shares, states, "My sincere hope is that over time he (Page) enunciates the strategy much more clearly."

BGC Partners analyst Colin Gillis, another major investor expressed more concern about the company's spending habits than its communication.  He remarked, "You got expenses growing faster than revenue and some people were caught by surprise by the willingness of the company to spend. But Larry Page has signaled pretty clearly that he is going to be driving up expenses. If the expenses are targeted and result in future revenue streams, then good for Larry. If not, that results in an undisciplined spending approach."

Google Chief Financial Officer Patrick Pichette tried to quell spending complaints assuring investors that his company was still taking a very "disciplined" approach and that every spending proposal would be "scrubbed and scrutinized."

Investors seemed unconvinced, though and share prices dipped over 5 percent during the day's trading.



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So...
By Aihal on 4/15/2011 5:40:43 PM , Rating: 5
In short, investors and shareholders seem to be upset that Google is creating jobs, raising salaries and increasing the funding for their departments, thus reducing potential profit *they* could get.

Stay classy, capitalism.




RE: So...
By cjohnson2136 on 4/15/2011 5:42:17 PM , Rating: 2
No they are fine with that but the way Google is doing they think is risky. That's why they worry. IMO I don't think they should worry though


RE: So...
By karndog on 4/16/2011 11:06:08 AM , Rating: 3
Don't know why you were downrated when what you said is true.. Must've been an armchair stockbroker who disagreed with you. It's a fact that once a company is listed on the stock exchange it is pressured to cut costs (corners), and eliminate jobs, which in turn severely impacts long term technological advancement and actual working class employees just so a select few gain an extra few percent on their dividends.


RE: So...
By Skywalker123 on 4/17/2011 4:32:55 AM , Rating: 2
You mean become efficient?


RE: So...
By Skywalker123 on 4/17/2011 4:30:44 AM , Rating: 2
Why should shareholders lose money to create jobs/


RE: So...
By daidaloss on 4/19/2011 1:56:08 AM , Rating: 1
Look I'm new to capitalism, since I was born in a Eastern European country. The way I understand this "stockholder capitalistic mentality" is more like ".. you don't like the profits Google makes, you invested 10 millions USD in Google stock, and wanted to earn 200 millions in just 2 years? You aren't happy with Google hiring new talent so to increase long term profitability and most important innovation? Buy some Faceboook stock from Goldman, you moron, and feck off". Just sayin'....


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