Google’s £32bn cash reserve is intended to give it free rein where it comes to acquisition opportunities
Google has stashed away $48 billion (£32bn) in cash to give it free rein and lots of financial options in the marketplace should tantalising acquisition targets show up in its crosshairs.
That’s what Google CFO Patrick Pichette recently told a crowd at a technology conference held by Morgan Stanley in San Francisco, according to a report from the Associated Press.
Serving the shareholder
“It serves the shareholder best to actually have that strategic ability to pounce” if a ripe acquisition target should pop up, Pichette said at the conference, AP reported.
Google has made more than 200 such acquisitions since its initial public offering (IPO) in 2004, including many smaller startups and larger purchases, such as the 2006 purchase of YouTube for $1.65 billion and the 2007 acquisition of DoubleClick for more than $2 billion.
In May 2012, Google made big headlines when it paid $12.5 billion for Motorola Mobility in a deal that aims to revive Motorola’s mobile phone business and bring value from its vast patent portfolio. In December, Google sold off the Motorola unit’s set-top box division, earning back $2.35 billion in cash and stock, as it got rid of a piece of the business that it didn’t value.
At the tech conference, Pichette said the company is confident Motorola’s cell phone business will eventually bounce back, AP reported. “These are not easy transitions,” he said. “We have great plans for Motorola. There is still really hard work to be completed at Motorola before we see tangible signs [of progress].”
The big pile of money that Google has amassed for such acquisitions is actually not a surprise, said Rob Enderle, principal analyst at Enderle Group.
Silicon Valley assets
“I think Apple’s got about $140 billion” in a similar fund, while “Microsoft typically holds back about $50 billion in liquid assets as well,” Enderle said. “For large companies in this space, it’s not unusual to hold that kind of money. It’s often the way they get new technologies by acquiring incubator firms. It’s kind of the way the Silicon Valley works.”
Google has been bringing in lots of money in the last few years as its search business has been booming.
For 2012, Google raked in revenue of $50.18 billion and $10.7 billion in profit, surpassing the $50 billion annual revenue plateau for the first time in the company’s history, according to an earlier story by eWEEK. Google had earned $38 billion in revenue and profits of $9.7 billion in 2011.
For the fourth quarter of 2012, Google reported revenue of $14.42 billion, up 36 percent year-over-year. Net income in the fourth quarter of 2012 was $2.89 billion, up from $2.71 billion in 2011.
Google’s latest stock prices were hovering around $806 a share on 4 March. The 12-month range has been $556 to $808 per share.
Share price turbulance
In October 2012, Google suffered an embarrassing early release of its third-quarter Form 8-K report to the US Securities and Exchange Commission’s website, which meant the financial data was accidentally available four hours before the stock market was set to close. That accidental report release triggered an early sell-off in Google shares, with share prices dropping by about 9 percent before the sale of shares were eventually halted.
In that third-quarter announcement, Google said that its third-quarter profit totalled $2.18 billion, down from $2.73 billion for the same quarter in 2011. Google’s third-quarter revenue for the period ending 30 September totalled $11.33 billion, which was lower than the expectations of a survey of financial analysts, who projected revenue of $11.87 billion. It was Google’s second quarterly earnings report since acquiring the Motorola Mobility unit.
In the company’s second quarter 2012 earnings report in July, Google posted revenue of $12.2 billion, which was a 35 percent year-over-year increase from 2011.
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Originally published on eWeek.