Google this afternoon reported Q1 revenues ex traffic acquisition costs of $8.14 billion, right about in line with the Street consensus at $8.15 billoon. Non-GAAP profits of $10.08 a share were ahead of the Street at $9.65 a share.
Google sites revenues were up 24%; partner sites revenues rose 20%. Paid clicks rose 39% from a year ago and 7% from Q4. Cost per click as down 12% form a year ago and 6% from Q4.
The company also announced plans to issue a stock dividend of one share of a new class of non-voting stock that will trade on the NASDAQ – Class C shares – in what is effectively a two-for-one stock split. The old class A shares will still trade as GOOG, while the new Class C shares will get a new ticker not yet announced. Google, unable to do anything the normal way, is giving this a Googlesque twist by creating a new class of shares rather than simply doubling the number of existing shares outstanding.
"Google had another great quarter with revenues up 24% year on year," CEO Larry Page said in a statement "We also saw tremendous momentum from the big bets we've made in products like Android, Chrome and YouTube. We are still at the very early stages of what technology can do to improve people's lives and we have enormous opportunities ahead. It is a very exciting time to be at Google."
As for the split, the company said that the structure is "designed to preserve the corporate structure that has allowed Google to remain focused on the long term." Since the new shares will be non-voting, selling them will not reduce a shareholder's voting interest in the company. Google notes that Chairman Eric Schmidt and co-founders Page and Sergey Brin will be subject to a "stapling" agreement that will require them to sell voting shares if they decide to sell any non-voting shares. Google said a special board committee has been working on a plan for creating a new class of stock since January 2011. The proposal is subject to holder approval – and given the Larry and Sergey's voting control, it will certainly be approved.
In a long "founders letter" posted in conjunction with the earnings release, Page and co-founder Sergey Brin explained the odd approach to splitting the stock. In short it is designed to make sure they continue to control the company.
" Throughout our evolution, from privately held start-up to large, publicly listed company, we have managed Google for the long term – enjoying tremendous success as a result, especially since our IPO in 2004," they wrote. "Sergey and I hoped, though we did not expect, that Google would have such significant impact, and this progress has made us even more impatient to do important things that matter in the world. Our enduring love for Google comes from a strong desire to create technology products that enrich millions of people's lives in deep and meaningful ways. To fulfill these dreams, we need to ensure that Google remains a successful, growing business that can generate significant returns for everyone involved."
The letter lays out there case for taking such an unusual approach to splitting the shares:
"Today we announced plans to create a new class of non-voting capital stock, which will be listed on NASDAQ," Page and Brin wrote. "These shares will be distributed via a stock dividend to all existing stockholders: the owner of each existing share will receive one new share of the non-voting stock, giving investors twice the number of shares they had before. It's effectively a two-for-one stock split – something many of our investors have long asked us for. These non-voting shares will be available for corporate uses, like equity-based employee compensation, that might otherwise dilute our governance structure.
We recognize that some people, particularly those who opposed this structure at the start, won't support this change – and we understand that other companies have been very successful with more traditional governance models. But after careful consideration with our board of directors, we have decided that maintaining this founder-led approach is in the best interests of Google, our shareholders and our users. Having the flexibility to use stock without diluting our structure will help ensure we are set up for success for decades to come.
In November 2009, Sergey and I published plans to sell a modest percentage of our overall stock, ending in 2015. We are currently halfway through those plans and we don't expect any changes to that, certainly not as the result of this new potential class. We both remain very much committed to Google for the long term.
It's important to bear in mind that this proposal will only have an effect on governance over the very long term. In fact, there's no particular urgency to make these changes now – we don't have an unusually big acquisition planned, in case you were wondering. It's just that since we know what we want to do, there's no reason to delay the decision. Also note that there will be no immediate change in votes, because everyone will still have the same number. In addition, Eric, Sergey and I have all agreed to "stapling" arrangements so that, above set thresholds, if our economic interest in Google were to decline, our votes would as well. We also have provisions to ensure all shareholders are treated fairly from an economic perspective."
With the post-earnings call still ahead, GOOG in late trading is up $5.44, or 0.8%, to $656.45.
Update: Here are some key tidbits from the release and the post-report call:
- The company ended the quarter with $49.3 billion in cash.
- Headcount at quarter end as 33,077, up from 32,467 at the end of December.
- Non-GAAP operating margin was 37%, down from 38% a year ago.
- CEO Larry Page focused first on performance. He says they had a very strong quarter. He says he has pushed hard to increase the company's velocity. But that they still have the passion and soul of a startup.
- Page says they have focused on having a simpler, more intuitive experience on the site.
- Page says he just passed 2 million followers on Google+.
- He says over 170 million people are on Google+.
- Chrome has over 200 million users.
- Display has over $5 billion in annualized run rate revenue.
- Android activations are over 850,000 a day.
- On the split, Page says that throughout the company's evolution they have managed the company for the long term.
- He says day-to-day dilution from employee stock options and acquisition will dilute the original structure of the company over the long term, which is a key reason why they created a new class of stock.
- The new non-voting shares can be used for equity incentives and other purposes.
- Page they do not have a particularly big acquisition planned. (They said the same thing in the letter.)
- Drummond also discussed the split in more detail. The new stock will be like the Class A and Class B shares, but with no voting stock. Holders will now own there original shares, plus a share of the new Class C shares. Drummond emphasized that every holder will retain the same voting interest prior to the dividend.
- CFO Patrick Pichette noted that revenue was up 1% sequentially. He noted that there was strength in most geographies andn verticals.
- Pichette noted that the business is healthy; that shifts in paid clicks and CPC separately do not reflect the business, he says. He says there are a complex set of factors affecting CPC and click trends, including mobile, and FX. He notes that the dynamics around CPC and paid clicks are very complex, so trying to pick out single factors "doesn't make sense." He says lower CPCs offer opportunity for advertisers to get better return on their paid clicks.
This entry passed through the Full-Text RSS service — if this is your content and you're reading it on someone else's site, please read the FAQ at fivefilters.org/content-only/faq.php#publishers. Five Filters recommends: Donate to Wikileaks.
No comments:
Post a Comment