Market Overview

What's Really Going On At Google? (GOOG)


Mashable has an article discussing Google's earnings report and gives some suggestions for what is really going on over at the search giant.

Expenses were way up this quarter, some significantly over a year ago, as the company tries to compete for talent, spends significantly on R&D, and has become a major force in marketing its products.

In Q1 last year, the company spent $291 million on payroll related expenses, including options and bonuses. This quarter the number jumped 48% to $432 million.

The lack of engineers in the country, especially in Silicon Valley, are causing Google to significantly overpay for talent, and it's eating into the bottom line.

R&D spending is up, but that's most likely due to social, as Larry Page has made it a point to try to get better at social networking, as it competes with Facebook, and Twitter in this field.

Google spent $1.23 billion ($989 million without stock-based compensation) this quarter in R&D, way up from $818 million ($627 million without stock-based compensation) in Q1 2010.

Over the past year, shares have been essentially dead money, up 2%, as investors flock elsewhere in tech land, as it looks like Google has stopped innovating. The growth is there, but it's not sexy anymore. Once the sex appeal of a stock is gone, it's very hard to get it back. Just ask Microsoft (NASDAQ: MSFT). Shares are down 2.6% this year, compared to the 4.2% rise in the Nasdaq ETF (NASDAQ: QQQ).

I was very concerned yesterday when Larry Page, the new CEO, just walked out of the conference call. To me, that doesn't show a leader, and many others echoed the same sentiment.

For me, there are much better places to put my money, until I know that the strategy is in place, and yesterday, continued to prove my point, that Google does not have a strategy to compete with Twitter and Facebook effectively. +1 and realtime search are great, but they are not going to keep the aforementioned companies from growing like weeds, and taking advertising market share, which is Google's bread and butter.

Only time will tell, but Larry is not off to a good start, and Wall Street isn't going to wait around to long to find out if he can get it together.

Posted-In: MashableEarnings News Short Ideas Tech Media Trading Ideas Best of Benzinga


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