Google's Q4 earnings miss highlights Motorola woes

Google's Q4 earnings miss highlights Motorola woes

Summary: Fortunately for Google execs, Motorola won't be a question going forward. CEO Larry Page was already talking about Google sans Motorola's losses.

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TOPICS: Mobility, Android, Google
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Google's fourth quarter earnings fell short of expectations, but at least it's clear why the company offloaded Motorola Mobility to Lenovo for $2.91 billion. Motorola Mobility's fourth quarter sales took a hit from a year ago and was clearly becoming a headache.

The search giant reported fourth quarter earnings of $3.38 billion, or $9.90 a share, on revenue of $16.86 billion including traffic acquisition costs. Google reported non-GAAP earnings of $12.01 a share for the fourth quarter. Wall Street was looking for earnings of $12.26 a share on a non-GAAP basis on revenue of $16.75 billion.

Google's Motorola Mobility detour: Running the numbers

Lenovo buys Google's handset business, US plan for $2.91 billion 

For Google, it's still all about the patents

Fourth quarter revenue excluding $3.31 billion in traffic acquisition costs was $13.5 billion.

Despite the launch of Moto X and what was supposed to be a strong smartphone quarter during the holidays, Google's Motorola unit struggled. Motorola reported fourth quarter revenue of $1.24 billion, down from $1.51 billion a year ago. Motorola reported an operating loss of $384 million in the fourth quarter. There's a disconnect between Google's revenue slide and the supplemental financials.

google motorola q4
google q4 rev breakdown

 

Fortunately for Google execs, Motorola won't be a question going forward. The rest of Google's business looks solid. Google CEO Larry Page was already talking about Google sans Motorola and said "standalone revenue was up 22 percent year on year."

On a conference call with analysts, Nikesh Arora, chief business officer, said performance advertising remains the mainstay of the company and he's optimistic that Google can hit all screens.

Arora said:

Performance advertising continues to be a main stay of our core business. We're seeing good growth as driven primarily by increased search activity across all screens, as driven by new measurement features and more sophisticated market ears lining their search and display advertising strategies.

Arora also added that Google's enterprise business continues to grow. CFO Patrick Pichette said that Google is continuing to invest in data centers. "Most of our capital expenditures right now are really driven by data center construction and machines that are actually driving both the core businesses of Google and (cloud services like Compute and App Engine).

Google site revenue was $10.55 billion, up 22 percent from the fourth quarter a year ago. Network revenue was $3.52 billion, up 3 percent from a year ago. Other revenue was $1.65 billion, up 99 percent from a year ago. International revenue was 56 percent of sales in the fourth quarter.

Other revenue includes content, apps as well as hardware such as Chromecast and Chromebooks.

Other points worth noting:

  • Average cost-per-click, a key metric, fell 11 percent in the fourth quarter compared to a year ago.
  • Paid clicks were up 31 percent in the fourth quarter compared to a year ago.
  • Other cost of revenue, mostly manufacturing and inventory costs as well as data center expenses, was $4.13 billion, or 24 percent of revenue.
  • Google had a whopping $58.72 billion in cash and equivalents at the end of the fourth quarter.
  • There were 47,756 full-time employees (3,894 in Motorola Mobile) as of December 31.
google q4 costs

 

Topics: Mobility, Android, Google

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28 comments
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  • Wall Street rewards GOOG after missing all their important benchmarks

    Google price up about 2.5% today after releasing their earnings report.
    kenosha77a
    • Cash

      Tour personal data is worth a lot
      gbouchard99@...
    • Yet Apple drops on their earnings report.

      Who said wall street needs to make sense.

      I imagine that shares are up based solely on the Motorola sale, as it appears they missed their target by a wide margin, and that's usually not rewarded on Wall Street.

      I wonder how much they would have dropped had they not sold off Motorola at the last minute?
      William.Farrel
      • But it does make sense...

        First, they dumped Motorola. But far more importantly, they announced their split date. THAT is something the market has been waiting for for a long time.
        NBrazil
    • Not only that, but there was not even a hint

      of Google is doomed unless they innovate, Google is doomed because Microsoft is still pumping money into Bing. Google is doomed because Yahoo, well, just because.
      baggins_z
      • Perhaps because Google is still innovating?

        Hard to complain about a company not doing something when it is doing just that.
        Emacho
        • Sure you can complain....

          When a company has risen totally on mouse clicks alone, driven by a total disrespect for anyone's personal data and a drive to get it at any cost, including stealing it from wi-fi, I don't see a lot of "innovation" involved, just shrewd guile and nothing more.
          Sure now that they sit on a pile of cash made from you and everyone else in the world that uses the internet by using your data against you to dump ads down your throat, they can buy companies like Android and Boston Dynamics and many others, who already did all of the "innovating". The Innovating that has come out of Google proper has been minimal at best and very slow moving. They are also willing to go to any length to steal employees from companies they know have the best engineers, such as Microsoft and Apple. Buying companies just for the patents and employees, I guess that is not uncommon but again, it's not innovative.
          The funny part is there must have been hundreds if not thousands of people who retired from posting on this site and others, because in the past they hated anyone that used internet advertising. So this total change of posters is just really phenomenel considering the lengths they had gone to, to push their agendas. Unless we have a situation of double standards, where anyone else that does it is evil, but a company that is linked to the one and only (and everyone better get on board) programming called open source, suddenly violating your "personal" computer, which drew massive numbers of hate filled posts about how it goes against everything good and just in the world, happily allow their personal hardware to be "raped" of data at Google's will in the name of open source. What a joke but sadly it is reality.
          I wonder why google does not release any new versions of Android until well after the fact, after they've released only to partners that will do their bidding and certain programmers that are in the fold. I thought open source was open source. And this is met with defense and stories of how Google is doing it the way it should be, suddenly changing their stance of 25 years.
          I'm not convinced you can download the entirety and certainly not the closed source components of Android. It's much like the Google Desktop code of the last decade, it was there for download, but missing half of the code. Yeah, sure Google.
          xuniL_z
  • Google and Samsung also settle patent issues ...

    that increases stability for both companies. Not everything is controlled by one factor.
    On the primary note, let's hope that Lenovo will keep some Moto manufacturing in the U.S.
    I know current models aren't selling that great, but I was going to seriously look at a U.S. manufactured Moto when I next chose a new Smartphone.
    jkohut
  • So how is it all blamed on motorola.

    I see that Moto lost 384 million, but Google still missed their numbers by about $1.36 a share?
    schultzycom
  • I don't think that was the reason.

    Apple owns the iPhone. Only Apple can build for it.

    Windows owns their phone but others can build for it. Of course, if Microsoft has their own hardware, then they have a competitive advantage.

    If Google owns no phone but has Android - and it encourages others to build on it, then nobody has an unfair advantage.

    Given a choice of being a new phone startup or writing for a platform, which would you choose?

    Note that Google kept the patents from Motorola. I'm pretty sure that was their intention all along.
    gavin.bollard@...
    • Security is paramount

      I would still prefer Apple over Android. I like the walled garden approach and feel safer than being in an open environment like Android. I feel it's too risky and is only going to get worse on Android platform.
      marcandsebe
    • Motorola screwed up

      Motorola thought they had a long term future with Google but instead got scroogled.
      Some idiot bean counter or bully investor like Icahn convinced Motorola to sell. Instead, Google took the valuable part (patents) and sold the junk to a company trying break into the handset market. Motorola as a brand will now disappear.
      This is why EBay ignored Icahn to split Paypal from them and this is why Apple should ignore him....the best short term economic decision is often the worst long term strategic decision.
      global.philosopher
  • Let's see how well the next quarter

    I'm not even using the Google search engine any more. It's been Bing for quite sometime now. I don't trust Google. After all they did steel the Android OS off of Apple and they are spying on us. That's why I don't have an Android phone. They can't be trusted.
    marcandsebe
  • De ja vu

    Google purchased Motorola.
    Google declared to support Motorola.
    Google sells Motorola.

    Google purchased Nest...
    costa k
  • Very poor decisions made on New Motorola Mobile Phones!

    I am a Motorola Guy and hurts me to have to say this, but Helen Keller could see that the decision to remove the option of the Replaceable Battery as well as the Removable Media was a very bad decision! Don't follow Apple! Lead with Innovation as you have done in the past and most of all, do your Marketing! What a shame Motorola did not continue to improve the Lapdock concept. What a crying shame.
    Biothunder
  • Who Knew!

    Google can't make any money on handsets with the pure Android experience.
    Neverhood
  • Post-Google era

    I wonder about the future of this corporation. I's just an online ad company when you strip away all the hype.

    Google is a sitting duck waiting for the next big thing to come along and kill traditional search. Search has stagnated for a decade while Google with its monopoly has focussed on everything imaginable apart from their most important product.
    timacheson
    • Search

      I agree with you but on totally different grounds. I think Google is a sitting duck, but not because traditional search will be killed off. I don't see that happening. I think search will only become more important as people continue to become even more connected than ever before and as people find more and more ways to use the web. Cloud computing is also growing and extending search into this area will be necessary as well.

      The reason Google is a sitting duck is because all their success rides on an algorithm. The reason people use Google in the 1st place is because it helps them find web pages so they can get information. The second someone comes up with a better algorithm Google is finished. How hard would it be to come up with a better algorithm? I don't think it would be that hard, we're still in the infancy of the internet as far as I'm concerned. There's a lot of improvements to be had.
      Maha888
      • People would still need to be convinced to switch to a new search engine

        Even if there is a better algorithm developed, getting people to use it might prove difficult if not impossible.

        Perhaps that is why Google is so hell bent on forcing users to subscribe to their services in order to use features of their other services. Trying to force some sort of tie in to their ecosystem.
        Emacho
  • Ecosystems

    How ironic... many fans of Android and bashers/haters of Apple refuse to enter the Apple ecosystem.

    Yet these same people are happy, accepting of and seem oblivious to the fact that Google is sucking them into it's own ecosystem (with all the tie-ins to and between Google apps and services), and collecting users personal data much more so than Apple does.

    Seems irrational and illogical to me.
    MacCanuck