Google 4th Quarter and full year results

Google. You can use it as a verb. As in the "old" days when I asked my pops what something is or was, he said, go look in the dictionary or the encyclopaedia. Now days you can use the company name as a verb, in other words, go Google it! The company turns 17 this year, in September, the founders Larry Page and Sergey Brin are still at the helm, the ex CEO and now chairman, Eric Schmidt is still large and in charge at the business. Recently Google has had some slippage, some questioning that they only have the one business. Whilst looking at their business revenues, it becomes clear that it is all about internet and search.

Check out their recent results: Google Inc. Announces Fourth Quarter and Fiscal Year 2014 Results. These results were from last week after market close Thursday. Let us look and focus on the full year, the company had revenues of 66 billion Dollars and recorded net income 14.444 billion. Net income per diluted share was 21.02 Dollars, the share price closed at 534.52 Dollars (up 4.67 percent) on Friday. It is fair to say that growth is slowing off their ever increasing base and that the company is nearly 90 percent reliant on advertising, with "other" chipping in around 11 percent.

There is plenty to this business that is good, their openness (not everyone thinks so) around their software and "free" (you need the internet) usage of most of their services certainly makes life a whole lot easier than before. To search for something, to navigate (maps), to view a place (street view), to browse share prices (finance) has never been more free or easier. Google translate is a big one too.

YouTube is huge and will continue to become bigger, whilst the company does not compartmentalise the different businesses that earn advertising revenues elsewhere, it is clear that online video watching is becoming bigger and bigger. Millennials are used to consuming data this way, it is easy to upload clips to YouTube. I upload "stuff" to Facebook all of the time. YouTube itself is the third most visited website in the world, after Google and Facebook. I think that Google have struggled more in the smartphone era, there are many more apps that allow you to perform basic functions that perhaps you would have used Google for in the past. It is still very powerful, many young people associate Google as the starting point for the internet.

The share price performance has been weak against a market that has been strong, Google is down over 9 percent in the last calendar year, the nerds of NASDAQ are up nearly 13 percent over the same time period. That is a massive underperformance. The risks here is that the company is a "one trick pony". They have tried with several huge ventures and failed, realising when they needed to cut the programs. Google Glass could have had massive sales, I guess the part about you speaking to yourself is a bit weird. The Wikipedia entry for the product says "Google glass was ... " in the past tense, meaning the product production has been shelved for now, the actual product will be tweaked and explored further, perhaps a second release with more fanfare at a later date. They are not the only major to fall short, I can think of several products from Amazon that have fallen flat.

Google X is the companies research department, it is kind of secret. Kind of lacks conviction, the company likes to view their Google X venture as the arm that encourages new ideas and new thinking, hopefully to invent the next best thing from artificial skin, to drones, to self driving cars, internet services from balloons and Google contact lenses to check diabetes patients and make sure that they are in check with their health and glucose levels i.e. be ahead of the curve in a non invasive way. Google X is not their core business, it does of course encourage creativity and research.

The main question is, has the company "lost" their mojo, or is the pace of internet search levelling off somewhat, if 20 percent growth counts as levelling off. I guess with 53,600 employees the company could not be regarded as entrepreneurial in nature, how is it possible to categorise the company as such? More than one sixth of the company market capitalisation is cash. The expectation is that the company will have around 100 billion Dollars in cash by the end of next year. I do not think that the company is going to blow the socks off estimates this year and as such it is not a screaming buy at these levels. If however you want to own a company that will continue to innovate and push boundaries, whilst trundling along with their gargantuan online advertising platform in the background, I would say that any sign of weakness is an opportunity to acquire more. Buy on weakness.