Google Q4 – Blot on the landscape

A nice set of numbers are obscuring the indelible stain of a company beginning to be run for the benefit of employees over shareholders.

• Google reported in -line Q4 numbers as advertising revenues rose for the traditional Q4 push to consumers.
• The shares experienced what I would consider to be a relief rally as the advertising revenues are holding up better than many had feared given the economic outlook.
• Revenues, EPS were $12.2bn, $10.65 compared to Bloomberg consensus at $12.4bn, $10.50.
• No meaningful guidance was given.
• UK and US remain the major markets while southern Europe dragged down the overall growth rate somewhat.
• Losses at Motorola Mobility declined compared to last quarter but the company managed to lose another $152m equating to margins of around -10%.
• Bear in mind that this was a company that Google acquired for $12bn, where it has made nothing for shareholders from the patents and which has persistently lost huge sums ever since acquisition.
• Despite big talk on the call about developing the business, the background of new management of Motorola paints a picture of bean counting rather than innovation.
• This means to me that, at best Motorola will dwindle further into insignificance in mobile phones with the exception of rivers of red ink presented each quarter.
• Why Google holds onto Motorola remains a total mystery as it adds nothing but losses and I am sure that the Chinese would jump at the opportunity to own something in the US.
• This combined with the fact that Google is ranked by Forbes as the best place in America to work for the fourth time and the $1bn being blown on a swanky new London HQ (of which more tomorrow), leads to me think that Google is starting to look like Siemens.
• Siemens is a company, which to my mind has long been run for the benefit of the employees to the detriment of shareholders.
• Companies that prefer employees to shareholders are more often than not serial underperformers and I am starting to get worried that Google is edging in this direction.
• Don’t get me wrong, I like Google for the position that it has craved for itself in the new economy and its long-term outlook but these red flags are becoming too numerous to ignore.