Google Inc net consolidated revenues: 27.2 billion euro

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1 5.1. Google Presentation Google Inc net consolidated revenues: 27.2 billion euro Advertising Google Websites 77% of net sales Fiscal year ended December 31, 2011 Advertising Network Members Websites 23% of net sales Other Revenues 3.6% of net sales Headquarters 2011 key figures Group sales Group operating margin billion euros 31% Group net margin -25.7% Staff 32,467 employees Capex ratio 9.1% R&D ratio 13.6% Mountain View, CA, USA Google is a US-based Internet and technology company that markets information-related products and services. It was established in 1998 and is the world s leading provider of Internet-related free IT technology and services. Google derives nearly all of its revenues from online advertising services which it provides through its search engine and related web properties. The company markets various advertising tools and services such as AdWords, AdSense, Google Display, Google Mobile and Google Local. In 2011, 96% of Google s revenues were derived from online and digital advertising services. In May 2012, Google completed the acquisition of Motorola Mobility, a telecom equipment manufacturer and spin-off company of former US-based telecommunications company Motorola, Inc. The acquisition marks Google s foray into the mobile telecommunication hardware business, a strategic move to strengthen its presence in the fast-growing mobile Internet market. Sales by region US 46.3% of net sales UK Rest of the world 10.7% of net sales 43.0% of net sales

2 5.1. Google Corporate strategy Betting on Google + In 2011, Google launched Google+, a social media platform aimed to compete with existing platforms, notably Facebook. As of January 2012, 90 million people had joined Google+. The company is heavily investing in the project, hoping to capitalise on the potential customer base that Google+ is expected to provide. While Google already has an agreement with Acxiom, a leader in gathering data that possesses more than 300 million profiles in North America, Google will be able to have direct access to private information thanks to Google+, making it easier to customise real-time online advertising with individuals. In the wake of Google+, Google acquired SocialGrapple, a company that offered indepth Twitter analytics, and Postrank, which offered social media data analytics. Expanding to the mobile business In August 2011, Google entered an agreement with Motorola to acquire its mobility division. Concern has been voiced regarding the Android operating system by other manufacturers who equip their handsets with Google s operating system. Google, however, has confirmed it would keep Android open. Although the company confirmed that the move would protect the Android ecosystem from competitors thanks to the acquisition of Motorola s huge patent portfolio, it has not revealed whether it will actually enter the hardware production business. Sustaining the pace of acquisitions During fiscal year 2011, Google acquired 25 companies from five countries. It also entered a merger agreement with Motorola, one of the biggest mobile handset manufacturers. Google Inc. has a long history of acquisitions, not so much to feed an organic growth but rather to feed its technological appetite. In 2011, the company invested 1.7 billion euros in acquisitions, and is likely that the company will continue to invest at the same pace.

3 5.1. Google Recent events March 2008 November 2009 Google acquires DoubleClick, an American technology company which develops and markets Internet advertising software and services. Google announces it has signed a definitive agreement for the acquisition of AdMob, a provider of mobile display advertising technology. The 540 million ($750 million) deal will enhance Google s expertise and technology in the mobile advertising business, one of the fastest growing segments of the advertising industry. Google acquires Admeld, an advertising optimisation platform for publishers, for 287 million euros. The company also acquires Postrank, a company that offers analytics services for social media. June 2011 October 2011 Google launches Google+, a social network platform, in an attempt to rival Facebook, the world s largest online social network. Facebook s large member base has indeed turned it into a major platform for online advertising. As of June 2012, Google+ reported some 250 million registered users worldwide. However, Google+ continues to lag behind Facebook as its high subscription figures are partially offset by a low rate of active users. Google acquires SocialGrapple, a social media analytics company that provides various services such as the tracking of keywords or the compilation of metrics on the growth of specific topics. November 2011 March 2012 May 2012 January 2013 Google acquires Apture, a provider of in-page search technology, and Katango, a company that developed an application which will help Google automate the listing of friends on its new social media platform, Google+. Google completes the acquisition of Motorola Mobility, a telecommunication equipment manufacturer and spin-off of the former Motorola, Inc. The deal, which amounted to nearly 9 billion ($12.5 billion) will strengthen Google s competitiveness in the mobile computing business, in which Google runs the Android ecosystem. Google announces it has completed the acquisition of Motorola Mobility Holdings, Inc., a manufacturer of mobile telecommunication equipment. The $12.5 billion (approximately 9.7 billion) will enable Google to strengthen the development of its Android ecosystem in the mobile computing market. Google announces financial results for fiscal year Financial highlights include a 32% yearly revenue increase to approximately 39 billion, a 9.9 billion operating profit and a 8.4 billion net profit. However, operating and net margin both decreased amid a stronger growth in cost of revenues.

4 5.1. Google Financial indicators Google s profitability ratios Google s liquidity ratios 60% 50% 40% 30% 20% 10% 0% ROE EBIT margin Strong profitability and sound return on equity Operating margin fell by 6 pp. to 45.3% in 2011 as costs of goods sold increased more rapidly than in Return on equity nearly stagnated at 12% compared to 13.2% in 2010, as net income grew at a slower pace (+14.5%) than shareholder equity (+25.7%) Quick ratio Current ratio Recovering liquidity Google benefits from strong liquidity thanks to high amounts of cash and liquid securities. Short term liquidity markedly dropped in 2010 owing to the issuance of new debt via additional commercial papers and the establishment of a large revolving credit facility. Both quick and current ratio fell about 6 pp., but regained roughly 2 pp. in % Google s solvency Debt-to-equity Solvency remains sound despite increased debt 15 Google s free cash flow and capital expenditure FCF Capex ratio Surging capital expenses 60% financed by operating cash 25% 20% 15% 10% 5% 0% Debt-to-equity ratio doubled to 25.1% between 2009 and 2010 amid a rapid increase in shortterm debt. Although the ratio only modestly decreased in 2011 (24.8%), Google s solvency has not significantly deteriorated as the company benefits from high interest coverage, strong profitability and large amounts of cash % 40% 30% 20% 10% 0% Capital expenditures nearly doubled from 8 billion to about 14 billion in 2011, lifting capex ratio from 38% to 50%. Free cash flow consequently turned negative ( -3.2 billion), even though Google s operating cash flow increased by over 25% during 2011.

5 5.1. Google Key data Google sales by segment unit: percentage share in 2011 revenues in % Advertising - Google Websites Advertising - Network Members Websites Other revenues Google sales performance by segment Advertising - Google Websites unit: annual change in % 3,6% 27,4% Other revenues 69,0% Advertising - Network Members Websites 0% 10% 20% 30% 40% 50% Advertising on Google s websites accounted for more than two thirds of revenues in As Google is able to generate its own content, the share of Google s websites in revenues has been stable over the last three years. All segments registered a double-digit performance in Despite an increase in the Members network, the loss of a search partnership prevented the segment from exceeding 2010 s performance.

6 5.1. Google Key data Google sales by region unit: share in 2011 revenues in % Google sales performance by region unit: annual change in % US UK Rest of the world Rest of the world 43,0% 46,3% US 10,7% UK 0% 10% 20% 30% 40% With 46.6%, the US share of 2011 revenues remained stable (at 47% in 2009). With 10.7% in 2011, the UK s share in revenues receded 2%, which were transferred to Rest of the world. As the latter registered a better performance than the UK for the last two consecutive years, it is likely that the shift from the UK to Rest of the world will continue. If the Rest of the world segment keeps outperforming the US segment, it is very likely that a shift in shares will occur from the US to Rest of the world as well.