Google results, decent enough

Google reported numbers post market, and at face value they certainly look good enough to me. They are available here: Google Inc. Announces First Quarter 2013 Results. Cash and cash equivalents swelled to 50 billion Dollars. Revenue increased 31 percent to 14 billion Dollars for the quarter, 55 percent of that outside of the US. So there you go, whilst Google has their biggest market inside of the US, it is no longer more than half. And in fact had been falling for a while, last quarter the US contributed 46 percent of revenues. The other big territory and I guess no surprises, is the UK, 11 percent of their revenues. Hmm.... they managed to employ a whole 30 people for the quarter (1000 added in the Google core businesses, there must have been pink slips elsewhere), so guess who wasn't hiring on balance. Capex is always huge, having to keep up with growing demand, they invested 1.2 billion Dollars in their infrastructure.


Google is a high growth stock, and therefore has to surprise the market to the upside each and every time that they report numbers, no exceptions. With full year earnings expectations just above 45 Dollars a share, that means that the stock trades on roughly 17 times earnings. Any stock that carries that sort of valuation needs to grow earnings strongly, quarter in and quarter out. Like everyone, the company is going to have to move to a world where the company continues to monetize mobile and mobile adverts make up for fewer web searches from the old avenues. Google glasses are being piloted right now, Larry Page said on the conference call that he was getting chills when talking about this product. The only downside that I can see, is having to talk to yourself seemingly, how do you feel about that, when NOT on a phone call.


Product innovation is obviously what this, and many other companies are about. But their core business is still search, which is profitable. And mobile has been a concern, but it is of course happening in front of our eyes. Remember yesterday that we pointed out that around 920 million smart phone devices are set to be sold this year. A goofy question on Facebook last weekend was something that made me laugh: "So what pretty place are you going to this weekend where you will stare at your phone?" BUT, just to be sure that you understand what is happening here, Google make half of what they make for their mobile ads on a per click basis, than what they make from desk tops. So, if it wasn't for the massive adoption of mobile handsets and browsing online versus on your laptop (who has a desktop anymore?), Google would have been more profitable.


Perhaps one of the reasons why the stock does carry a premium is that they are so very innovative, with many different products being piloted all the time. The driverless cars are great, but I don't know any big vehicle manufacturer that has adopted this technology yet. Perhaps the glasses are going to be incredibly cool and consumer adoption will be wider than you think. Whether to own the stock or not, I suspect that you MUST have them. The company will continue to change, be innovative and grow earnings. How much juice is left in the current price, I think not much at all. But that is for people who have six month time horizons. If you have a much longer time horizon, the company is quality. Real quality and remains a buy.