A dividend would be a boon to Google investors who have endured a 1.5 percent stock decline this year. Though Google's purchase of Motorola Mobility Holdings Inc. for $12.5 billion will eat into its cash pile, the company is adding about $2 billion to $3 billion in cash a quarter. Even after the deal is approved, Google will still have more cash than International Business Machines Corp. and Intel Corp. combined.
"There's a pattern here that makes sense, and I'm sure Google will figure out the right thing to do," said Michael Holland, chairman of Holland & Co., a New York investment firm that oversees more than $4 billion in assets, including Google shares. "It's a little bit of a victory dance, if you will, to be able to have the sort of cash surplus that a company like Apple does and Google does. To share some of it is sharing the victory dance."
Holding On
Google could make an argument for holding on to its cash, by saying it needs the money for deals or investing in new businesses. Still, a dividend or buyback could assuage investor concerns that Google might instead make an unneeded, large acquisition, said Tim Ghriskey, who as co-founder of Solaris Group helps oversee about $2 billion in assets, including Google shares.
"Certainly, Google can afford it," Ghriskey said.
The company's cash could get a further boost from rising sales and earnings. Mountain View, California-based Google may report later today that first-quarter profit before certain costs increased to $9.64 a share from $8.08 a year earlier, as the company benefits from spending on search-based Web advertising, according to analysts' estimates compiled by Bloomberg. Revenue, excluding sales passed on to partner sites, is projected to climb 24 percent to $8.14 billion.
Google Chief Executive Officer Larry Page, when asked last week about what the company might do after his competitor's dividend announcement, said, "I think Apple has more cash than we do," according to an interview with Bloomberg Businessweek. He said the company had nothing to announce.
Board Discussions
Google's board has discussed what to do with the cash, including buybacks, Chief Financial Officer Patrick Pichette has said on past calls with analysts. Today's earnings call will provide analysts their first opportunity to revisit the question since Apple announced its dividend.
Apple, whose market capitalization is almost three times the size of Google's, in March announced a quarterly dividend of $2.65 a share, along with the stock buyback. The maker of the iPhone and iPad tablet -- rivals to products based on Google's own Android mobile software -- had amassed $97.6 billion in cash as it rolled out best-selling products under co-founder Steve Jobs.
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