Kokomo Tribune; Kokomo, Indiana

Breaking News

Community News Network

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 | Photo Reprints
Community News Network
  • Screen Shot 2014-04-22 at 4.42.47 PM.png VIDEO: Leopard attacks crowd in India

    A leopard caused panic in the city of Chandrapur when it sprung from the roof of a house and charged at rescue workers.

    April 22, 2014 1 Photo

  • The top 12 government programs ever

    Which federal programs and policies succeed in being cost-effective and targeting those who need them most? These two tests are obvious: After all, why would we spend taxpayers' money on a program that isn't worth what it costs or helps those who do not need help?

    April 22, 2014

  • In cuffs... 'Warlock' in West Virginia accused of sexual assault

    Police in West Virginia say a man claiming to be a “warlock” used promises of magical spells to lure children into committing sexual acts with him.

    April 22, 2014 1 Photo

  • Cats outsmart the researchers

    I knew a lot had been written about dogs, and I assumed there must be at least a handful of studies on cats. But after weeks of scouring the scientific world for someone - anyone - who studied how cats think, all I was left with was this statement, laughed over the phone to me by one of the world's top animal cognition experts, a Hungarian scientist named Ádám Miklósi.

    April 22, 2014

  • McCain 1 House Republicans are more active on Twitter than Democrats

    Your representative in the House is almost certainly on Twitter. Your senator definitely is. But how are they using the social network? Are Democrats more active than Republicans, or vice versa? Who has the most followers on the Hill?

    April 22, 2014 1 Photo

  • Do your genes make you procrastinate?

    Procrastinators, in my experience, like nothing better than explaining away their procrastination: General busyness, fear of failure, and simple laziness are just a handful of the excuses and theories often tossed around. Now researchers from the University of Colorado Boulder have added another option to the list: genetics.

    April 21, 2014

  • Do White Castle prices tell us anything about the minimum wage?

    The paper looked at how many delicious steamed sliders the minimum wage has been able to purchase over time. The point is that as it notes, in 1981, the $3.35 minimum could buy a whole dozen. Today, at $7.25, it could purchase just 10.

    April 21, 2014

  • VIDEO: Moose charges snowmobile, flees after warning shot

    While snowmobiling in New England, Bob and Janis Powell of Maine were charged by a moose and caught the entire attack on camera.

    April 21, 2014

  • Can Hillary Clinton rock the cradle and the world?

    What's most interesting to contemplate is the effect becoming a grandmother will have on Hillary's ambition. It's one of life's unfairnesses that a woman's peak career years often coincide with her peak childbearing years.

    April 21, 2014

  • Smartphone kill switches are coming

    Smartphones need kill switches. It's a relatively easy solution to the pricey (and irritating) problem of smartphone theft. But who would have thought that the big carriers would team up with Apple, Google, Microsoft, Nokia, Samsung and lots of other manufacturers to voluntarily begin adding the technology by July 2015? The cooperative spirit! It makes so much sense!

    April 18, 2014

Latest news
Featured Ads
Only on our website
AP Video
Raw: Deadly Bombing in Egypt Raw: What's Inside a Commercial Jet Wheel Well Raw: Obama Arrives in Japan for State Visit Raw: Anti-Obama Activists Fight Manila Police Motels Near Disney Fighting Homeless Problem Michigan Man Sees Thanks to 'bionic Eye' Obama to Oso: We'll Be Here As Long As It Takes Bon Jovi Helps Open Low-income Housing in Philly Pipeline Opponents Protest on National Mall Hagel Gets Preview of New High-tech Projects S.C. Man Apologizes for Naked Walk in Wal-Mart New Country Music Hall of Fame Inductees Named 'Piles' of Bodies in South Sudan Slaughter SCOTUS Hears Tv-over-Internet Case Chief Mate: Crew Told to Escape After Passengers Iowa College Finds Beauty in Bulldogs
Parade
Magazine

Click HERE to read all your Parade favorites including Hollywood Wire, Celebrity interviews and photo galleries, Food recipes and cooking tips, Games and lots more.
Obituaries
Poll
Kelly Lafferty's video on Tom Miller