The Edmond Sun

Business

January 15, 2014

Google outspends top five rivals combined in move beyond Web ads

SAN FRANCISCO — Google, drawing from its $56.5 billion cash pool, is spending more money than five of its biggest U.S. competitors combined to buy into new markets as growth in Web advertising slows.

Including this week's announced deal to buy Nest Labs for $3.2 billion in cash, Google has spent more than $17 billion in the past two years to purchase hardware, software and advertising-technology companies, according to data compiled by Bloomberg. Apple, Microsoft, Facebook, Amazon.com and Yahoo have spent less than $13 billion in total to buy companies in the same period, based on deals with disclosed prices.

The spending blitz, which is mostly in cash instead of stock, underlines how Google is paying top dollar to expand its reach and acquire the talent necessary to push deeper into areas such as smartphones and Web-enabled gadgets. While Google has dominated Internet search, a business that generates billions of ad dollars each quarter, the company is seeking new revenue from other sources and turning to its cash hoard to provide an advantage.

"They're looking at what's next," Sameet Sinha, an analyst for B. Riley & Co. in San Francisco, said in an interview. "They're saying we're going to keep our cash for acquisitions."

Leslie Miller, a spokeswoman for Mountain View, Calif.- based Google, declined to comment.

Google's cash and equivalents jumped 24 percent from a year earlier in the third quarter to $56.5 billion, while net revenue increased by 5.2 percent to $11.9 billion. Google gets 84 percent of sales from Internet ads, even after diversifying into hardware and other areas.

Revenue growth slowed last year and is expected to do so again in 2014 based on analysts' estimates as more online activity shifts from personal computers to smartphones, tablets and other connected devices. That hurts Google's sales because mobile ads typically cost less and because search is less prominent on other devices. By 2017, PCs will account for 13 percent of connected-device shipments worldwide, down from 29 percent in 2012, according to researcher IDC. Tablets will make up 17 percent by 2017, and smartphones will account for 71 percent, IDC said.

Google's all-cash acquisition of Nest, its third biggest, gives the company a maker of smart thermostats and smoke alarms built by Tony Fadell, who previously helped Apple co-founder Steve Jobs create the iPhone. Fadell's co-founder Matt Rogers is also an Apple alumnus, as are at least 97 Nest employees, according to LinkedIn Corp. That's talent Google can put to use.

"They know from their Apple days how to scale something," said Rob Coneybeer, a partner at Shasta Ventures in Menlo Park, Calif., which was an early investor in Nest. "These guys are not just good startup designers who can work on a shoestring, but they know how to deploy and leverage lots of capital."

The Nest deal follows the June 2013 purchase of mobile mapping software maker Waze Inc. for almost $1 billion in cash, Google's fifth-largest acquisition. Waze provides social tools that Google can incorporate into maps, along with showing real- time road hazards and alternate routes. Facebook had been in talks to buy Waze before Google succeeded with its offer.

Google's biggest acquisition was its $12.4 billion deal for Motorola in 2012, which gave the company a smartphone maker along with a portfolio of wireless patents. It's all part of Google's recognition that the Internet is everywhere, with search and display ads making up just a piece of it, according to Frank Gillett, an analyst at Forrester Research in Cambridge, Mass.

"In this world of interacting with lots of different connected products, the integration of hardware, software and cloud service will be really important," Gillett said. "At some point, really good advertising starts to cross the boundary into assistance and advice."

Google later sold off a piece of Motorola for more than $2 billion to Arris Group.

Among top U.S. competitors, Microsoft has been the biggest buyer in the past two years after Google, spending about $9 billion. Most of that was on the pending $7.4 billion purchase of Nokia's handset unit and the $1.2 billion acquisition of business-software provider Yammer .

Facebook's biggest deal was mobile photo-sharing application Instagram Inc. for more than $700 million in 2012. The company was spurned in its effort last year to purchase mobile app Snapchat Inc. for $3 billion, a person with knowledge of the matter said in November.

Amazon's only notable deal in the past two years was for robotics company Kiva Systems Inc., which cost about $700 million. Yahoo's disclosed deals total about $1.2 billion, with most of that spent on blogging startup Tumblr last year.

Apple's spending amounted to less than $1 billion since early 2012, with about $350 million spent on fingerprint- technology company AuthenTec Inc. The company has been using its cash, which totaled $146.8 billion at the end of September, to placate shareholders like Carl Icahn, who are demanding greater returns. The company paid out $2.8 billion in dividends and bought back $5 billion of its shares in the fiscal fourth quarter.

While Google has resisted returning cash to shareholders, not all of its money is being spent on acquisitions. The company is investing internally on products like computerized Google Glass eyewear and driverless cars.

To bolster its experiments in robotics, Google acquired Boston Dynamics Inc. in December. The company, which makes robots for the Defense Department, will be part of a new product area led by Andy Rubin, former head of the Android software unit.

Gene Munster, an analyst at Piper Jaffray Cos., said Google will need to continue making "big bets" to move its leadership in search into new areas.

"They're trying to solve bigger longer-term problems, and to do that they need platforms," said Munster. "They're willing to pay up for those platforms."

1
Text Only
Business
  • psc 1.jpg City likely to borrow less for PSC due to sky-high tax revenue

    During his State of the City Address Edmond Mayor Charles Lamb made a political announcement — he’s planning on running again for the office.
    Lamb made the comments in the question-and-answer session of his presentation during an Edmond Area Chamber of Commerce luncheon at Rose Creek Golf Course, 17031 N. May Ave.
    Mayor pro tem from 2005-2011, Lamb was elected mayor last year. His long record of service in Edmond includes serving on the City Council from 1993 to 2011.
    The question about if he will run again came from the audience. Lamb alluded to his desire to be around when the Public Safety Center is finished, which will be in the fall of 2015; the next mayoral election will be in the spring of 2015.

    April 15, 2014 1 Photo

  • Dr. Fielding’s variance denied by close vote

    Reverse-angle parking will continue at the 13 N. University Drive office of Dr. Brad Fielding. The Edmond City Council rejected a variance request by the local optometrist to end the city’s pilot project in front of his medical facility.
    Councilman Nick Massey and Councilwoman Victoria Caldwell supported Fielding’s variance request that was dismissed in a 3-2 vote.
    Four parking lines were striped late last year at Fielding’s business after the city opened new bicycle lanes along University. The city cites the safety for bicyclists and motorists who traditionally depart while backing into traffic as the main reasons for introducing reverse-angle parking.

    April 15, 2014

  • brisket2.jpg Food Network show visits Guthrie for ’89er Days

    Guthrie’s annual ’89er Days Celebration provides a variety of activities for people to enjoy including a carnival, rodeo, parade and lots of food vendors.
    This year, visitors at the 84th annual event, which runs Tuesday through Saturday, will notice an added bonus when a film crew from the new television series “Carnival Eats” will be in town filming for its inaugural episode.

    April 15, 2014 1 Photo

  • jc_TOUCH THE CLOUDS.jpg OSBI grounds voted locale for new sculpture

    City staff is working toward an agreement with the Oklahoma State Bureau of Investigation Lab to place the “Touch the Clouds” bronze sculpture on the OSBI grounds on Second Street. The City of Edmond would retain ownership of the artwork.
    The Edmond City Council voted 4-1 this week to allow city staff to negotiate the agreement as soon as possible. Mayor Charles Lamb voted against pursuing the agreement.
    City Councilwoman Victoria Caldwell said she was initially interested in placing the sculpture near the Smith House because of it’s proximity to state Highway 66.

    April 15, 2014 1 Photo

  • 11 file for county offices

    Eleven candidates filed for Oklahoma County races last week with County Assessor Leonard E. Sullivan, 79 of Oklahoma City, re-elected to office without opposition, said Doug Sanderson, secretary of the Oklahoma County Election Board.
    Voters will nominate their party’s candidates on June 24 for the statewide primary election, Sanderson said. A run-off primary election is set for Aug. 26. The statewide general election is scheduled for Nov. 4.

    April 14, 2014

  • Why Facebook is getting into the banking game

    Who would want to use Facebook as a bank? That's the question that immediately arises from news that the social network intends to get into the electronic money business.

    April 14, 2014

  • Rally for Rigs OIPA hosts Rally for the Rigs

    The Oklahoma Independent Petroleum Association this week hosted a “Rally for the Rigs” at the Oklahoma state Capitol.

    April 12, 2014 1 Photo

  • Watch China for the next economic trigger

    For my male readers out there, remember back to your teens and 20s when one of the primary goals was getting a date and finding a girlfriend? Oh come on! You can admit it.  Well imagine how it would have complicated matters if no woman would give you a second thought if you didn’t own property. No, not that old beat up car you drove and sometimes slept in. I mean real property, as in a house.

    April 11, 2014

  • Sunshine 1 Sun salutes Sunshine Award winners

    The Edmond Sun brought more than 100 businesses together April 4 for the annual Sunshine Awards breakfast at First Presbyterian Church of Edmond. Catering was provided by Sunshine Award winner Millie’s Table.

    April 11, 2014 2 Photos

  • Millions of Android phones, tablets vulnerable to Heartbleed bug

    Millions of smartphones and tablets running Google's Android operating system have the Heartbleed software bug, in a sign of how broadly the flaw extends beyond the Web and into consumer devices.

    April 11, 2014

Stocks