Google has a $30bn warchest to spend on foreign acquisitions, or so it’s told regulators. If it decided to spend the cash in one go the options for what it could buy* are rather limited.
There are only seven companies outside North America (we skipped Canada, rather unfairly) valued between $29bn and $30bn:
- Philips has to be top of the list, as the only technology company on the list. Beard trimmers would be a natural fit for the Silicon Valley behemoth, but medical equipment and lightbulbs not so much.
- Nordic banks Swedbank, DNB and SEB could provide Google with a solid platform to launch its own currency.
- Investor is out of the question: a Stockholm holding company with a wide portfolio of Swedish minority stakes, it would only be useful if Google planned to go a whole lot further and buy up every Swedish blue chip (currently worth a bit less than twice Google).
- East Japan Railway is a bit low-tech for Google; the problem of self-driving trains has already been solved, after all.
- Compass Group brings the most obvious cost savings: the British catering giant already runs the canteen at the Googleplex (“I liked the sandwich so much I bought the company,” Larry Page didn’t say). Perhaps Google could apply its innovative approach to rethink lunch.
John Gapper looks at the European Court of Justice’s ruling this week that Google must remove the internet search results of people who wish them to be cleared. He finds the ruling troubling.
Or as he states:
…this only shows that the EU’s 1995 data protection directive is an ass.
Before long, people’s search results will start to resemble official biographies, recording only the facts that they want other people to know, and not the remainder of reality.
This contrasts heavily with the view of digital privacy campaigners who see the move as a significant step in the right direction. Read more
From Huffington Post’s Bianca Bosker this week regarding Google’s acquisition of DeepMind, with regards to the latter’s concern that artificial intelligence poses an extinction level threat for humanity:
Google’s acquisition of DeepMind came with an estimated $400 million price tag and an unusual stipulation that adds extra gravity — and a dose of reality — to Legg’s warning: Google agreed to create an AI safety and ethics review board to ensure this technology is developed safely, as The Information first reported and The Huffington Post confirmed. (A Google spokesman said that DeepMind had been acquired, but declined to comment further.)
Matt Yglesias at Slate has been on a quixotic campaign to stop the total devaluation of disruption as a term. Thank Steve Jobs for that magic cloak of respectability.
Still, in the perfectly rational world of tech acquisitions, the term has power. Matt quotes arch-magician biographer Walter Isaacson:
Isaacson also pointed out that Nest co-founder and CEO Tony Fadell will be joining Google as part of this deal. “Fadell was one of the team that created the iPod. He was very deep into the Apple culture … when Apple was so innovative.”
Matt makes the case for execution over true innovation. We think though that the tech world’s focus on disruptive innovation may have more to do with fear than hope. Parts of tech are wildly profitable, something that leads to what Andrew Smithers would call a bout of stockbroker economics when it comes to assessing the long term prospects of tech companies. Read more
The updated Google Q3 is out, and we go from…
PENDING LARRY QUOTE Read more
Accidental earnings release? In any case, highly unusual intraday results from Google had sent shares down 7.45 per cent at pixel time. (And the numbers were rubbish – $9.03 per share versus $10.65 expected) Read more
Back in 2009 Standard Chartered’s Wei Li and Stephen Green figured out that while the great Chinese firewall may be capable of restricting access to undesirable internet content on the mainland, it can’t stop people from searching for said undesirable content.
While Google has suffered some setbacks in China, the analysts believe the search engine is still responsible for some 12-13 per cent of mainland searches. Read more
This is not the usual yada yada…
– Google’s chief legal officer, in a footnote to the founders’ letter sent out with Google’s latest results. The company’s jigged around its stock structure: Read more
Regulators in the US and EU have given grudging approval to Google’s $12.5bn acquisition of Motorola Mobility, the company’s biggest gambit in the smartphone patent wars, the FT reports. The US Department of Justice said it had “significant concerns” about how Google would enforce patents acquired in the Motorola deal. Apple sued Motorola Mobility for asserting rights infringement the very same day Google won approval for its deal, in a reminder of the criticisms directed at Google’s treatment of patents used by its rivals, Thomson Reuters Legal says. Google said the deal’s approval will “supercharge Android”, its smartphone software platform, Ars Technica says.
Reuters reports that Google and Facebook have reacted to a court directive in India on Monday warning them of a potential crackdown by authorities if they do not take steps to protect religious sensibilities. The two companies are among 21 that have been asked to block potentially offensive material. The move, off the back of private petitions to the court, have stoked fears over censorship. Last year, a law was passed in India that made companies like Google responsible for user-generated content on their sites, giving them 36-hours to take down content deemed offensive once there has been a complaint. The WSJ reports that the content in question in this case involved images of religious figures. These have since been taken down by Google but only on its localised India domain, making the content still available elsewhere.
Facebook already has so much cash, and so little desire for true shareholder control, that it should really call its IPO off instead of “gratifying” its venture capital backers and employees, the FT’s John Gapper writes in a must-read column. Investors have reacted warily to Facebook’s suggested $75bn-$100bn valuation of 100 times price to earnings, says Reuters. Google emerged on public markets in 2005 with a price 218 times its earnings, but was valued at $23bn at the time. Facebook’s price tag would make it worth 53 per cent of Google’s current valuation, despite the latter company earning 10 times the profit, notes the WSJ.
Google shocked Wall Street on Thursday with a big shortfall in its latest earnings, as an unexpected slump in pricing in its core search advertising business combined with slowing international growth and another jump in costs to dent recent optimism about the company’s prospects, the FT reports. The internet search giant also blamed the rising value of the dollar, foreign currency hedging costs and a writedown on its investment in wireless broadband carrier Clearwire for the disappointing numbers. The news led to an immediate 10 per cent drop in its share price in after-hours trading.
Google shocked Wall Street on Thursday with a big shortfall in its latest earnings, as an unexpected slump in pricing in its core search advertising business combined with slowing growth internationally and another jump in costs to dent recent optimism about the company’s prospects, reports the FT. The internet search giant also blamed the rising value of the dollar, foreign currency hedging costs and a writedown on its investment in wireless broadband carrier Clearwire for the disappointing numbers. The news led to an immediate 10 per cent drop in its share price in after-hours trading. Google’s quarterly results fell short of Wall Street’s heightened expectations for the holiday season, Reuters says. Several analysts zeroed in on an 8 per cent drop in cost-per-click, or money paid by marketers to the company for search ads, versus analyst estimates of a slight increase. It was the first such decline in more than two years, leading to nearly a half-dozen questions from analysts during the call and a terse one-liner from chief executive Larry Page who at one point requested that “maybe we can get our next question not about CPCs.”
European regulators have narrowed down a list of concerns about Google’s business practices in the region, pushing their two-year probe into a new stage, the FT says. While the European Commission has still not decided on whether to launch a formal complaint or to file a “statement of objections”, officials are looking closely at Google’s ranking of search results to include its own services near the top. Eric Schmidt, Google’s executive chair, flies into Brussels this week to meet Joaquín Almunia, the competition commissioner, reports the NYT.
Breaking news on Thursday night/Friday morning: TPG Capital enters the fray for Yahoo.
Here’s more from the NYT: Read more
Google’s latest quarterly earnings soared above most analysts’ forecasts as the internet search company rebounded to its highest growth rate since before the 2008 financial crisis and shrugged off recent signs of economic weakness, reports the FT. The third-quarter results, released late on Thursday, drove the company’s share price up by more than 6 per cent in after-hours trading, despite a continuation of the hiring binge that has caused unease on Wall Street this year. Reuters puts the results down to bumper ad sales and deft costs controls. There’s no rest for the internet giant, though; Google is in discussions with record label execs with a view to launching an online music store to rival iTunes, reports Bloomberg.
Spotted on page 66 of Citigroup’s epic Tuesday report on “Social Media, E-payments & the new Digital Market”, a neat depiction of the talent war among some the big digital media firms:
Eric Schmidt, chairman of Google, denied that the search company “cooked” its search results to gain an advantage over rivals, as he fended off persistent questioning during a Senate hearing into how Google wields its online power, the FT reports. However, his responses left some members of the US Senate’s antitrust subcommittee expressing frustration over how Google appeared to sidestep its own search algorithms to give prominence to its own online services, such as Maps and Finance. Asked by Herb Kohl, chairman of the subcommittee, if Google was a monopoly or had dominant power in search and other online markets – a status that would put it under special responsibility to avoid unfairly hurting competitors – Mr Schmidt said: “I would agree, senator, that we’re in that area … From our perspective, we see ourselves as having a special responsibility to debate all the issues that you are describing with us now.” A lawyer for the company, appearing later, denied that the comments amounted to an admission that Google was a monopoly.
Just as correlation does not imply causation, this post should not imply usefulness. Consider it a bit of light frippery at the end of a rather challenging week for symmetrical trading.
Here’s how it works. We’ve drawn the graphs of a few securities into Google Correlate, which finds search terms whose popularity matches the given trend over time. It is, in short, an automatic logical fallacy generator. Read more
The Chinese government has renewed the licence under which Google runs its local website, a decision that reassures investors over the legal basis for foreign internet companies’ business in the country, reports the FT. “We can confirm that the government has renewed our [internet content provider] licence,” a Google spokesperson said. The announcement comes less than a week after a set of new regulations took effect which appeared to put the legal structure of many foreign and overseas-listed Chinese internet companies at risk. The rules, spelling out how the Chinese government will review acquisitions of Chinese companies by foreign investors for national security implications, say that foreign investors will not be able to avoid a review through techniques such as contracts that give them control over a domestic company.
Google’s offices in Seoul have been raided by South Korean regulators, the FT reports, citing two people familiar with the situation. Google itself refused to confirm the Korea Fair Trade Commission had visited its offices. In a statement, though, it said it would “work with the KFTC to address any questions they may have about our business”. The operation by regulators on Tuesday follows allegations earlier this year from two Korean internet companies that Google unfairly uses its Android operating system to block competitors to its search and other services on smartphones.
Google has reached a $500m settlement with US prosecutors over advertising for Canadian pharmacies selling drugs into the United States, Reuters reports. The forfeiture represents Google AdWords revenue from the pharmacies, and pharmacies’ sales of drugs in US markets. Google was aware as long ago as 2003 that it was illegal in most cases for pharmacies based in Canada to ship prescription drugs into the US, according to an agreement between prosecutors and the company that was made public on Wednesday. Google had set aside $500m in unspecified legal charges in May.
Google has reached a $500m settlement with US prosecutors to resolve a criminal investigation into its accepting advertisements from companies selling unlicensed pharmaceuticals, the FT reports. The payment is one of the largest forfeitures imposed in the US, according to federal authorities, and is a severe dent to the comany’s reputation. The internet search company was aware as long ago as 2003 that it was illegal in most cases for pharmacies based in Canada to ship prescription drugs into the US, according to an agreement between prosecutors and Google that was made public on Wednesday, but continued to accept the adverts on its AdWords search advertising system, and advised pharmacies on how to make messages more effective, until it learnt of the criminal inquiry in 2009, the agreement added. The $500m payment represents the revenues Google made from selling the adverts and the estimated revenues generated by the pharmacies from their sales to US consumers.
Google’s $12.5bn acquisition of Motorola Mobility will likely spur intense consolidation in the smartphone industry, although it remains unclear in what form, the FT says. Asian hardware markers could be impelled to reduce reliance on Google’s Android software and strike deals with HP or Microsoft’s operating systems, or create further vertical integration of hardware and software, with a Nokia-Microsoft tie-up in prospect. It remains to be seen whether Google can integrate with Motorola though, says the WSJ, given widespread cultural differences. Indeed, if Google had Motorola in 2010 it would have saved cash and stood a superior chance of integration, argues Ars Technica.
Speaking of a patent war in the smartphone industry…
Compared to the massive Google-Motorola deal, Samsung’s ongoing battle with Apple is more like a skirmish, but it probably shows just how disruptive Google’s strategy could be, if they can pull it off. Read more
Google’s $12.5bn acquisition of Motorola Mobility, its biggest ever, will give it access to more than 17,000 patents and 7,500 pending patents for defending its Android software, the FT reports. By bidding $40 per share for Motorola at a 63 per cent premium, Google might be buying three times as many patents as were sold in the recent Nortel auction, but it’s also paying three times as much, says Daring Fireball. Google’s bid may have been forced because of Microsoft interest in the Motorola patents, Gigaom adds. The company’s plunge into the hardware market could also leave Research in Motion a takeover target as players look to consolidate, the WSJ says.
Google has outlined its largest and boldest acquisition yet with the agreement to pay $12.5bn in cash for Motorola Mobility, the US smartphone company, in a deal that escalates the search company’s rivalry with Apple and gives it control over more wireless patents, the FT reports. The acquisition potentially puts Google into competition with other smartphone makers which, like Motorola Mobility, use Google’s free Android operating system. It will also give Google a new and valuable channel into the living room through Motorola Mobility’s profitable set-top box business which makes receivers for cable TV operators. The deal is expected to face regulatory scrutiny, and Google agreed to pay a $2.5bn break-up fee if it abandons the transaction, one person familiar with the transaction said. Some analysts believe Research in Motion will benefit, the WSJ says, because it will create confusion for the other Android licensees, which include Samsung and LG.
John Paulson’s quarterly 13F filing was released late on Monday and the headlines make for interesting reading. We may go through it in more detail later but we thought this portfolio change-up was worth noting right away:
Monday, August 15, 2011 5:25:30 PM RTRS – PAULSON & CO INC RAISES SHARES STAKE IN WELLS FARGO & CO WFC.N BY 64 PCT TO 33.6 MLN SHARES Read more