Google Misses Profit Expectations, But is Finally Rid of Motorola
January 31, 2014 6:26 AM
comment(s) - last by
TAC is at a 2-year low, indicating high hopes for upcoming profitability increases
Google Inc. (GOOG) finally figured out an answer of what to do with its struggling Motorola Mobility unit --
get rid of it
. On Tuesday it announced it would be selling the unit for $2.91B USD to
Hong Kong, China-based Lenovo Group
, Ltd.'s (
I. TAC is Looking Good, Profitability is Strong
That deal overshadowed the earnings for Google, which were
delivered after hours
on Thursday. Overall, Google saw a substantial rise in revenue, surging from $14.42B USD in Q4 2012 to $16.86B USD in Q4 2013. That beat the expectation of analysts
surveyed by Thomson Reuters I/B/E/S
, who were expecting $16.75B USD.
The core internet business -- which includes the growing mobile advertising division -- earned $15.7B USD, or roughly 93 percent of the total revenue. Traffic acquisition costs (TAC) -- the fees that Google pays partners for advertising clicks -- were a strong point of the earnings reports. As a percent of revenue, these fees dropped to only 23.5 percent, their lowest level in two years indicating strengthening profitability.
Excluding the income passed on to partners, Google earned $13.6B USD, which bested the $13.4B USD that analysts
Despite being hampered by Motorola Mobility in profitability, the lower TAC drove net income (profit) up to $3.38B USD (for non-GAAP) ($9.90 USD/share) -- up roughly 17 percent on a year-on-year (YoY) quarterly basis.
Factoring in certain items, net income (GAAP) was at $4.10B USD ($12.01 USD/share), up roughly 15 percent YoY. That's 1.5 percent less than the $4.16B USD ($12.20 USD/share) that the Thomson Reuters I/B/E/S survey predicted, and 2.0 percent less than the $4.18B USD ($12.25 USD/share) that the Bloomberg-surveyed analysts predicted.
Along with the Dec. 2012 sale of Motorola's set-top box division to Arris
for $2.3B USD
, that move left Google baring $7.3B USD of
the $12.5B USD it paid back in 2011
to acquire the American phonemaker. Motorola has $2.9B USD in cash, but Google lost $2.3B USD so far on unit. That leaves the net cost at $6.7B USD.
Overall financials are definitely headed in the right direction and should look even better in future quarters with the Motorola money-vacuum out of the picture.
II. From Motorola Mobility to Robots
Google estimated the
value of Motorola's patents (of which Google will retain roughly 80 percent, with Lenovo getting the rest) at $5.5B USD
. So by Google's own valuation it's retaining about $4.4B USD in value, putting it about $2.3B USD in the hole on the deal.
Furthermore, it's hard to believe that Google's initial valuation on the patents would hold true today. Google's attempt at defensive-mind litigation against Apple, Inc. (
) with the patents was
thrown out of court
and resulted in
thorny abuse complaints in the U.S. and EU
. Likewise Google lost its case to Microsoft Corp. (
), which led to it
not only having to give Microsoft free licensing
, but having to actually pay damages.
But the good news for Google is that it's getting rid of the troubled unit, which saw losses growth 2.5-fold on a year-on-year (YoY) quarterly basis. Google's former headache is now Lenovo's problem to deal with.
Going on without Motorola, Google will look to continue to improve its mobile monetization and now-profitable YouTube video service. As makers of the world's most popular smartphone platform, which runs on roughly four out of every five smartphones sold globally today, Google has tremendous potential for mobile revenue.
Google is also eyeing other near product segments. It's continuing to push wearables, such as its
Google Glass Explorer
-- commonly referred to as
. Rumors have been floating that Google
its Nexus branded Android smartphones and tablets, but other rumors have suggested it may up the ante with
a Nexus TV
[Image Source: Google/AP]
The Mountain View, Calif.-based software giant is also
buying up a number of small robotics firms
. I spoke with an executive from a firm not affiliated with Google, but familiar with the purchased firms. They told me that the overall word amongst roboticists is that Google is acting proactively and isn't quiet sure (or at least isn't indicating) where the project is headed yet.
My guess would be targeting robots at service industry tasks (waiters, cashiers, etc.),
(space colonization, etc.), and
smarter factory robots
(with fuzzy safety algorithms). With
Andy Rubin -- the former Android chief -- at the helm
, though, I wouldn't worry too much about them finding ways to put forth appealing products to consumers, the industry, and researchers alike.
This article is over a month old, voting and posting comments is disabled
RE: Absolutely amazing.
1/31/2014 4:22:41 PM
There's nothing unusual about the amount of detail in their 10K.
Some companies may provide the kind of detail you are asking about but that it not common.
In an era of Sarbane-Oxsley there not much reason to pay the accountants more to give more detail than what is required by the SEC. If investors want more information, it can be had or combined from other sources. But if you don't like it, go buy a share and say something as the next stockholder meeting.
“So far we have not seen a single Android device that does not infringe on our patents." -- Microsoft General Counsel Brad Smith
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