By now the headlines already will have covered the basics. Google's (GOOG) fourth-quarter revenues were up 18% to $5.7 billion, a solid showing. Profits fell, but only because Google wrote down loser investments in AOL, a unit of Fortune parent Time Warner (TWX), and Clearwire, the Wimax company that's also an embarrassment to Motorola and Intel (INTC). On a day that Microsoft's (MSFT) stock tanked by 12%, once again Google comes up smelling like roses. Not super fragrant roses. But roses all the same.
Google believes it is doing well because scarce advertising dollars continue to flow to search and because it keeps improving its search engine. (Google made 300-plus search-quality improvements during 2008, says the company's product pooh-bah Jonathan Rosenberg.) Microsoft, in comparison, can't shoot straight online. Earlier in the day the company reported that its online unit's operating loss had doubled to $471 million on flat revenue.
Google's got almost $16 billion in cash now, compared with $28 billion for Apple (AAPL) and about $21 billion for Microsoft (which has given back oodles to its shareholders in the form of special dividends). Google ended the year with 20, 222 employees (one of whom is my wife), up about 100 people from the previous quarter. That's a sea change for the company that previously couldn't recruit people fast enough. (Larry Page, who likes to review every hire, must be at least a little relieved by this.)
If there was anything at all notable about Google's results and comments to investors during an end-of-day conference call, it is the curious prudence that has crept into its collective voice. Google always used to say it was careful about costs and thoughtful about how it managed its resources. That was well understood to be code language for: "We spend willy nilly -- wouldn't you? -- and we're willing to try just about anything. Our core business is that good."
Things have changed a bit. Credit this with new CFO Patrick Pichette, who has been at Google only six months and is carefully deciding where -- and where not -- to push. You can hear the tension in his own conflicting statements. "We have a lot of flexibility within our model," he said Wednesday, meaning Google easily can cut more costs when it wants or needs to. And then, "We are managing this business for the long term. The mindset of the company is a growth company." That latter comment signals Google will continue to invest and spend on things that may never see a return, just as powerful risk-taking concerns should -- despite the professed commitment to prudence.
So where does the more measured behavior manifest itself? I've already noted the hiring halt. Capital expenditures declined 19% from the third quarter to $368 million. This is a huge deal in Googledom as capex goes primarily to data centers and other hardware that make the Google search engine hum.
One last item of note. Google is offering employees the opportunity to exchange underwater stock options for newly priced options due to the stock price having been hammered. (The only catch in the exchange is that employees will have to wait an additional 12 months before selling re-priced options.) The stock price is currently around $300, compared with $700 in late 2007. The number of shares eligible for exchange is about 3% of the shares outstanding, and the exchange will result in a charge to earnings of $460 million over a five-year period.
One must re-phrase this last bit in English: Google is transferring almost half a billion dollars in wealth from shareholders to employees, and for what ....? Motivation and retention, says Google. This a well known farce, as old as the Valley, which tells itself first that it offers generous stock options as a form of incentive and then, when share prices plummet, moves the ball so its employees, whose incentives apparently didn't work (as if the stock price were under their control) can be re-incentivized. Retention? Would someone please tell me where the average Google employee is going to go right now?
In conclusion, and as the headline says, Google is in good shape. Not fantastic. But plenty damn good. It's also becoming more and more like other technology companies in so many ways.
There was a magical moment that had nothing to do with financial results Wednesday afternoon in Apple's (AAPL) conference call with investors. What made the magic remarkable is that it came from Tim Cook, the supposedly uncharismatic, unemotional, uninspiring chief operating officer of the company, the guy whom Steve Jobs tapped to run day-to-day operations during his medical leave of absence, even though Cook already runs the company's operations.
Asked the MOREJan 22, 2009 10:15 AM ET
Pattie Sellers and I are having a debate about board memberships. She intelligently argues that boards are good, especially for women, who have a disadvantage at the highest reaches of corporate America.
Still, you'll know Carol Bartz, the incoming CEO of Yahoo (YHOO), is super serious about her massive task at hand if she immediately drops off the boards of Cisco (CSCO), where's she's the lead independent director; Intel (INTC) a MOREJan 14, 2009 3:32 PM ET
Just before the new year a Silicon Valley financial type pointed out to me that August Capital, an old-line but quiet venture firm, had invested twice in disc-drive leader Seagate (STX), once as a venture investment and again alongside Silver Lake and TPG in a going-private transaction in 2000. "Who knows," this investor quipped, noting Seagate's plummeting stock price, then and now below $5 per share, "maybe August will get MOREJan 14, 2009 11:14 AM ET
To start the week off, here are a few things that jumped out at me over the weekend.
* In a New York Times review of a new biography of William Randolph Hearst was this startling fact: In the 1890s, when Hearst relocated to New York from San Francisco, his new city was home to 48 daily papers. Reviewer and veteran newsman Jack Rosenthal calls this period "print's riotous spring, a MOREJan 12, 2009 10:45 AM ET
There's been so much online discussion about the interview I did with Google's (GOOG) Eric Schmidt on this subject that I thought I'd post a few more thoughts. (John Battelle snarkily notes that all the discussion has been online ... that's, of course, just the discussion you're seeing, John, which isn't the same thing as all the discussion; most people haven't even seen a print copy of that issue of MOREJan 9, 2009 4:41 PM ET
President-elect Obama's first speech since the election won't likely be remembered much by history, especially compared with his upcoming inaugural address. Nevertheless, it was an important moment because it marked the beginning of his new campaign, to sell a massive stimulus plan he hopes will make 2009 the low point for the American economy rather than merely the second year of a more prolonged slump. Here are a few things MOREJan 9, 2009 10:51 AM ET
A couple years ago, right around the time Dell's exploding laptop batteries were getting a fair amount of media attention, I had breakfast in San Francisco with a senior Dell executive. He was seriously annoyed by all the focus on Dell (DELL), even though his company wasn't the only one with the spontaneous combustion problem caused by Sony's (SNE) batteries.
I used, with little success, an explanation I like to give MOREDec 24, 2008 9:33 AM ET
Facebook held a holiday party Monday night for journalists at its headquarters in rainy, cold Palo Alto. The conversations there were strictly off the record, so I can't quote what people told me over egg nog and finger food.
I'll share a few thoughts anyway because Facebook's an interesting company that's in the news a lot. First, it has acquired interesting DNA. Much has been made of how young and inexperienced CEO MOREDec 16, 2008 6:38 PM ET
I'm always too slow to get around to reporting about our great Fortune conferences. Once again, in the better-late-than-never category, here are a few thoughts from the Fortune 500 Forum, held last Monday to Wednesday (Dec. 1-3) in Washington, D.C., at the Ritz-Carlton hotel near DuPont Circle.
This conference draws together a group of CEOs and other big shots to go high level: the economy, corporate governance, state of the world, MOREDec 10, 2008 9:35 AM ET
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