|
 For the first time, the company disclosed the profitability of
Google's search engine and its other online services, and how much
it is spending on ambitious technology projects such as self-driving
cars.
The numbers were lapped up by investors, who saw room for growth in
Google's traditional business, and were relieved to see that
spending on new projects it calls 'Other Bets' was not as lavish as
some had feared.
"It's pretty interesting that 80 percent of YouTube views come from
outside of the United States. I didn't think it would be that high,"
said Kevin Kelly, managing partner at Recon Capital. "It
demonstrates that the value of YouTube can continue to be
extracted," he said.
The operating profit margin for its Google unit was 31.9 percent in
the most recent quarter, compared to 25 percent for Alphabet.
Alphabet spent $869 million on capital expenditures for the Other
Bets in 2015, up from $501 million in 2014. It has not made any
projections about if or when those bets cumulatively would become
profitable.
"As long as the core business continues to operate well with
accelerated revenue... investment in those businesses can continue,"
said Ronald Josey of JMP Securities.
The company said consolidated revenue jumped 17.8 percent to $21.33
billion in the fourth quarter ended Dec. 31, from $18.10 billion a
year earlier. Analysts had expected $20.77 billion, according to
Thomson Reuters I/B/E/S.
Revenue for Other Bets was $151 million, up 29.8 percent from $106
million in the same quarter last year, primarily from its smart-home
monitoring unit Nest, Google Fiber, which provides high-speed
Internet access, and its life sciences business Verily.
Adjusted earnings of $8.67 per share handily beat analysts' average
estimate of $8.10 per share.
In a call with analysts, Chief Financial Officer Ruth Porat
attributed the strong earnings to "increased use of mobile search by
consumers," as well as "ongoing momentum" in YouTube and
programmatic advertising, referring to the automatic buying of ads.
Kelly at Recon Capital said he would not be surprised if YouTube saw
a surge in advertising revenues beyond the 17 percent increase it
saw during the 2015 fiscal year.
Total operating losses on the Other Bets – which include
glucose-monitoring contact lenses and Internet balloons - increased
to $3.57 billion in the 12 months ended Dec. 31, and $1.2 billion in
the fourth quarter.
The Google unit houses its Internet and related businesses such as
search, ads, maps, YouTube and Android as well as hardware products
such as its low-cost Chromebook laptops.
[to top of second column] |
Google Chief Executive Sundar Pichai said on the call that its Gmail
service crossed one billion monthly active users last quarter,
joining Search, Android, Maps, Chrome, YouTube and Google Play in
topping that mark.
He also touted the company's performance during the holiday shopping
season, saying that programmatic video impressions doubled this
season compared to last, and that 60 percent of them came from
mobile devices.
But Porat, without providing figures, said the company planned to
accelerate capital expenditures in 2016 compared to the previous
year.
Google's shares rose almost 5 percent in after-hours trading.
Alphabet's combined share classes were worth $549 billion, compared
with Apple, which had a value of about $534 billion.
Alphabet will officially overtake Apple in market value if both
companies' shares open around current levels on Tuesday.
Google's advertising revenue increased nearly 17 percent to $19.08
billion, while the number of ads, or paid clicks, rose 31 percent,
the company said. Analysts had expected paid clicks to increase 21.8
percent.
Advertisers pay Google only if someone clicks on their ad.
Net income in the fourth quarter rose to $4.92 billion, or $7.06 per
Class A and B share and Class C capital stock, from $4.68 billion,
or $6.79 per share. (http://bit.ly/1WY8V19)
Adjusted earnings of $8.67 per share excluded certain one-time
items.
(Reporting by Anya George Tharakan in Bengaluru and Deborah M. Todd
in San Francisco; Editing by Savio D'Souza, Stephen R. Trousdale and
Bill Rigby)
[© 2016 Thomson Reuters. All rights
reserved.] Copyright 2016 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.
 |
