Google Inc-Cl A (GOOGL): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

Summary:
Google is one of leading providers of target-based advertisements on the web. Google's fourth-quarter results missed the Zacks Consensus Estimate. Though the number of clicks and non-operating income remained positive, CPCs continued to decline in the last quarter. The company has shown superb execution to date, more or less maintaining share in a fast-growing market. We are also positive about its progress in video, which continues to outgrow its search revenue. Google's search market share is of course a big positive, which along with its focus on innovation, strategic acquisitions and proactive approach to mobile should continue to generate strong cash flows. However, we recognize the growing competition and legal hassles and therefore reiterate our Neutral recommendation on the shares.

Overview:

Mountain View, California-based Google, Inc. was founded in 1998 by Larry Page and Sergey Brin. The company is in the business of providing target-based advertisements on the web.

Products and services involve the provision of web-based information through own and hosted (network) websites, with the help of software and Internet tools on both computing and mobile platforms. Advertisements are served alongside, using Google's AdWords, AdSense, DoubleClick and YouTube tools, with the company's page ranking and text-matching technology and infrastructure facilitating the process.

In 2013, Google generated 63% of revenue from owned websites, 22% from network websites and another 8% from other Google revenues. The remaining 7%, which is mostly hardware, came from Motorola. Approximately 47% of revenue was generated in the U.S., 10% came from the U.K. and the balance from Other countries.

Google Technologies

Search, including general, personalized and advanced search is the primary revenue earner. Some of Google's innovations here include Flight Search, Search plus Your World, Google Now and Google's Knowledge Graph. The company's AdWords program helps advertisers create ads and the AdSense program helps their distribution by websites that are a part of the Google Network. Last year, the company incorporated the AdMob technology right into AdWords, which helped the extension of ad campaigns onto AdMob's mobile network. Google mobile includes features such as search by voice, by sight, or by location Google has also emerged as a major force in the display advertising segment, which includes ads in the video, text, image and other formats. The Google Display Network, DoubleClick and YouTube platforms helped growth. Additionally, through Google Local, the company delivers local information about shops, restaurants, parks and landmarks for 80 million places all over the world on Google.com, Google Maps and Google Maps for mobile.

Over the past few years, Google has created a number of platforms including Android (Linux-based Android operating system that was initially created by Google, but later developed by the Open Handset Alliance) the Chrome OS and browser running on Windows, Mac, and Linux computers Google Play (cloud-based digital playback of 700,000 music, movies, games, apps and books) Google Drive (cloud-based storage) Google Wallet (enabling in-store contactless payment at 200,000 merchants in the U.S. or online payment through the Google Wallet account) and Google TV (same-screen viewing of TV and Internet).

The Enterprise business includes apps like Gmail, Google Docs, Google Calendar, and Google Sites. Other offerings include Google Search Appliance, Google Site Search and Google Commerce Search. Google apps have been developed with the intention of providing users with tools that would enable them to create, share and communicate information collected or generated by them.

Google inherited wireless devices and home entertainment services from Motorola. The company sold the home business to Arris Group and has now announced the sale of Motorola's hardware business to Lenovo.

Following a 2-for-1 stock split in April 2014, the company created the Class C class of shares: one Class C share in lieu of each Class A and Class B share. The Class A shares (symbol GOOGL) have a single voting right per share. Class B shares, which don't trade publicly have 10 voting rights a share. The Class C shares (symbol GOOG) have no voting rights. Although the EPS will be halved as a result, investors wont be affected because they now hold double the number of shares.

Total revenue in 2013 was $59.83 billion, an increase of 17.4% from 2012 levels and having grown at a CAGR of 20.4% over the past five years. The company employs a large number of sales staff in its 85 offices across more than 50 countries worldwide and supplements the sales force with online channels. The most significant competitors are Facebook Inc, Microsoft Corporation and Yahoo! Inc.

Google Inc-Cl A (GOOGL): Read the Full Research Report
 
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