Brief description of the company’s operations
Google Inc. is an American multinational public corporation, which activity includes investments in Internet search, cloud computing and advertising technology. The company keeps and advances a number of Internet services and products and gets profits primarily from advertising through its AdWords. Larry Page and Sergey Brin established the company. It was first incorporated as a private company, September 4, 1998, and August 19, 2004 started vending the shares on the stock market. At which point, Larry Page, Sergey Brin and Eric Schmidt all decided to work as the core team for Google for approximately twenty years, or up until 2024. However when 2006 arrived, the company had a change in plans. Hence, that is the reason why the company currently resides in its headquarters in Mountain View, California.
The types of products that the company offers include mobile and online products released or acquired by Google Inc., all significant desktop. Such as advertising, search engine, productivity tools, enterprise and other products (the Gmail email service, the Google Docs office suite, the Google+ social networking service, Google Chrome web browser, the Picasa photo organizing and editing software, the Google Talk instant messaging, etc.). It was estimated that Google run over one million servers in data centres around the world.
Google does not prove by a document a Vision or Values on the Google website but the company is going to stay on the position of a major competitor within the world of computer science and technology by being innovative, creative, and crafty. Google’s mission statement is “To organize the world” information and make it universally accessible and useful”.
Google is the first among search engines – more popular than Yahoo and Bing, but it is currently under the impact of severe rivalry from e-commerce positions, which are Kayak (travel), Monster (Jobs), WebMD (Health), Amazon, and EBay. Users often pay attention to those sites for searching of their services or products. Of course, Twitter and Facebook also increasingly compete with Google because of their social nature.
Google has 49,829 full-time high qualified workers as of Q1 2014, who works incredibly hard every day to serve customers. Diversity in workers creates a competitive advantage for competing with other media titans. Google uses a policy of Innovation Time Off as a motivation technique, which gives Google’s engineers the possibility to spend 20% of their labor time on attractive projects for them. Its revenue of 2013 was US$ 59,825 billion and total assets equal to a total of $110,92 billion.
Acquisition of the largest video sharing YouTube by Google in 2006 analysts strongly criticized, since at that time it was more of YouTube’a problems with constant lawsuits from record labels and movie studios than good. But the search engine only strengthened its leadership position by offering users video in the search results. The deal amounted to $1.65 billion.
Brief bios of top executives and Board of Directors
The fates of Google founders Sergey Brin and Larry Page are a wonderful example of how scientific talent, creative exploration, courage and love to experiment can pave the way to success. Indeed, the meteoric rise of two young billionaires can be called the embodiment of traditional American dream in the age of computers and the Internet. If one of the founders of Google is an American-born, the second is a native of Russia, or rather, the former Soviet Union.
The decisive moment in the life of Sergey Brin came in March 1995, when during the spring meeting of new doctoral candidates in computer science, he met a young scientist named Larry Page, the future co-president of Google. Brin was assigned to accompany Paget on campus. If to believe the annals of Google, originally the two were not thrilled from each other and quarreled furiously discussing any topic. However, it was soon discovered that both of them are extremely interested in the problem of extracting information from large data sets. Sergey and Larry friends, developing a new system of Internet search for their college dorm. The next important step was to write a joint collaboration of “The Anatomy of a Large-Scale Hypertextual Web Search Engine”, which is believed to be contained the germ of the future incredible ideas. Among the scientific papers at Stanford University, this work occupies 10th place in terms of it interest call.
In mid-1998, Brin and Page left their studies at Stanford University (though Brin is still officially considered there who took a vacation). The rest as they say is history. Actually Google story began September 7, 1998, when it was incorporated as a limited liability company. Its first office was the garage of one of his friends, located in Menlo Park, Calif., and the number of employees was originally 4 people. In this search engine Google responded to 10,000 requests per day, and even though the numbers in the “second tier”, was included by PC Magazine’s list of 100 best websites and search engines in 1998. The following year, the company moved to a new office in Palo Alto.
Eric E. Schmidt Executive Chairman. Since joining the company in 2001, Eric Schmidt has aided in the development of Google from a Silicon Valley startup to an international chief in technology. Holding the position of an executive chairman, he is accountable for the outward problems of Google: creating partnerships and extensive business dealings, administration outreach and technology thought direction, in addition to guiding the CEO and senior leadership on commercial and strategy issues.
Nikesh Arora Senior Vice President and Chief Business Officer supervises all income and consumer operations, along with marketing and partnerships. Since joining Google in 2004, he has held numerous positions with the company. Latterly, he led company’s total straight sales transactions. He also advanced and succeeded the company’s transactions in the European, Middle Eastern and African markets and was liable for generating and increasing planned partnerships in those areas in order to provide Google’s rising amount of users and advertisers.
David C. Drummond Senior Vice President, Corporate Development and Chief Legal Officer. David Drummond joined Google in 2002, and serves as senior vice president, corporate development and chief legal officer. His obligation is to lead company’s international teams for legal, public policy, communications, corporate development/mergers and acquisitions, and product quality operations. Another his responsibility is to be as CEO of Google’s investment supports, Google Ventures and Google Capital.
Patrick Pichette, Senior Vice President and Chief Financial Office, is company’s CFO. He has nearly 20 years of experience in financial transactions and supervision in the telecommunications segment, comprising seven years at Bell Canada, which he joined in 2001 as executive vice president of arrangement and performance controlling. Working at Bell Canada, Mr. Pichette held numerous administrative positions, including CFO from 2002 until the end of 2003, and was instrumental in the administration of the most widespread communications network in Canada and its continuing movement to a new state IP-based infrastructure.
Important events or transactions within the last five years
In 2008 the search engine acquired advertising company DoubleClick. Having a huge income through their own advertising projects AdWords and AdSense, the company decided to become a leader in the global online advertising and buying DoubleClick, the partner list which contains the major sites – such as MySpace, The Wall Street Journal and America Online. The acquisition price - $3.1 billion.
In 2013, the search giant was never as active and picked himself under 19 different companies worth more than $25 billion. The most expensive transaction was the acquisition of the navigation application Waze, which cost the company $966 million. Equally valuable ($125,000 000) was buying Channel Intelligence – product to boost sales in e-commerce. Program that recognizes the facial expressions and gestures, Flutter Google cost $40 million. The cheapest purchase was language application Wawii – only $ 30 million.
Google Inc. acquires service for the analysis of advertising campaigns and investments – Adometry. Terms of the transaction were not disclosed. At present Adometry is a foremost provider of tools and solutions for analytics management of marketing campaigns; Internet public relations, with computerized procurement; Tracking offline transformations, etc. Among the clients Adometry are companies such as: Ebay, Citigroup, Levi Strauss, Dish Networks. After completion of the transaction Adometry team will work within the Department of Google Analytics and will develop the system Google Analytics Premium. In turn, the leadership of Adometry reported that for the first time after the merger with Google terms of service for its customers will not change. However, upon completion of the integration all clients will be transferred to Adometry platform of Google. A few days ago Google has also completed the purchase of Rangespan, the British company. It is scheduled that the company mixes its solutions in functional service Google Shopping and will cease to provide customers with the same analyst.
Financials (Key accounting numbers/ratios going back at least 5 years)
Liquidity of the company is its ability to convert its assets into cash payment to repay short-term obligations. Assessment of a company’s liquidity is performed with the help of financial ratios, which allow the comparison of current assets, with varying degrees of liquidity, with the amount of current liabilities. Current ratio characterizes the ability of the company to meet its short-term obligations of the most easily realizable assets – current assets. This ratio gives the most general assessment of the liquidity of assets. Since the company’s current liabilities are repaid mainly due to current assets, to ensure the proper level of liquidity it is necessary that current assets exceed current liabilities. Cash ratio is the ratio of cash provisions in the bank notes, coins, etc. to total liabilities to customers, i.e. the amount of current and deposit accounts. Since cash provisions do not generate revenue, banks seek to minimize them to the level required to meet the current requirements of the clients, typically it is equal to 8% and is calculated as Cash and Cash equivalents / Current liabilities.
So Google has a higher amount of current assets in comparison with current liabilities and should definitely be capable to compensate its short-term debt according to Current ratio value. Google’s Cash ratio means that 369% of short-term liabilities should be discharged every day.
b. Financial leverage
Leverage explains the amount of debt the company has on its balance sheet, and it is one more assessment of financial wellbeing. Commonly, the more debt a business has, the riskier its stock is, because debt-holders cover first assert to a company’s assets. This is substantial, since in unpredictable situations, if an enterprise becomes bankrupt, there may be nothing left over for its shareholders after the company has satisfied its debt-holders. Debt/Equity ratio = Total Debt / Total Stockholders’ Equity. Interest coverage ratio is a financial indicator, which compares the values of Earnings before interest and taxes to the cost of interest payments. It shows a possible degree of decline in operating profits of the enterprise in which it can serve the interest payments. Also it helps to assess the level of protection of creditors from non-payment of debts by the borrower.
Debt to equity ratio is very low so means that a company has been calm in financing its growth with debt. Normal value of Interest coverage ratio is considered from 3 to 4. If the ratio is less than 1, it means that the company does not generate sufficient cash flow from operating profit to service interest payments. As Google’s indicator is higher the rate 100 times, the company has very health financial condition.
c. Asset management
When considering the company it is important to determine how effectively management manages assets entrusted to it by the owners of the company. On the balance sheet of the enterprise the nature of the assets used by the company can be judged. A large amount of accumulated depreciation in relation to available real estate, machinery and equipment suggests that the company has old equipment that requires the upgrade. If the balance has large amounts of cash, it can be assumed that there is money excess that could be used to better advantage. In order to identify trends in the use of company resources a number of factors based on the ratio of turnover and the amount of capital required to ensure that the volume of transactions are used.
Inventory turnover is an activity ratio calculated as cost of revenue divided by inventory. Asset turnover is an activity ratio calculated as total revenue divided by total assets.
A high Inventory turnover ratio implies either strong sales or ineffective buying. The higher the Asset turnover ratio, the more sales that Google is producing based on its assets.
d. Profitability
Profitability measures a company’s ability to make incomes corresponding to sales, assets and equity. Such ratios evaluate the capability of a company to make incomes, profits and proceeds in relation to exact metric, regularly the sum of money invested. Their role is to emphasize how successfully the profitability of a company is being managed. Return on Equity = Net Income / Total Stockholders’ Equity. Profit margin is a ratio of profitability that shows the level out of every dollar of sales a company essentially retains in incomes.
Return on equity expresses whether the business is making enough profits for its shareholders. Google generates only 14.8% of the profit for its shareholders. Google’s profit margin indicates that it has poor control over its expenses in comparison with its rivals.
Market performance (Stock price/returns over the last five years relative to the S&P 500 index and major competitors)
IT-companies are becoming increasingly significant players in the worldwide market, altering a diversity of manufacturing areas, from trade to economics. Google, became public in 2004, later in ‘84 after Exxon – gained its deep effect on the growth tendency of online services and digital content consumption, a style that has only improved with the invention of smartphones and tablets.
Market capitalization of Internet company Google first time in history exceeded $400 billion in the course of trading on the Nasdaq in February 2014. In the course of trading on the Nasdaq, Google shares rose to a historic high of 1191.87 dollars. Based on this indicator, Google capitalization was estimated at $400 billion. At the close of trading Google stock worth 1190.18 dollars, and capitalization of 399.7 billion dollars. Recall that $1,000 mark in the company’s shares for the first time struck in October 2013.
In terms of market capitalization of Google gives Apple about $80 billion. Apple shares on the Nasdaq reached a maximum of 537.75 dollars before closing at 535.96 dollars. Thus, the company’s market capitalization reached the mark of 479.9 billion dollars.
Financial analysis refers to the valuation of a business to deal with the preparing, budgeting, controlling, forecasting, and developing all economic information within an organization. The aim of financial analysis is in evaluation of the viability, balance and success of company’s operations, sub-business or task. In order to conduct financial analysis successfully the company’s finance manager should prepare reports by means of ratios that provide use of information available at financial statements and other reports.
Google is a very exceptional corporation in that it has an extremely unique business model. Such model cannot be simply copied, due to company’s economies of scale and by observing the subsequent data, the internet is growing like a rocket to the moon.
On the basis of performed analysis for Google Inc., it has been identified that the company is fruitful enough in reaching its strategic purposes to a larger amount. Google Inc., starting from just a smart algorithm, has implemented a totally new business model, has become the world leading search engine, has produced captivating applications as Google Earth, Google Video, Google Maps, Gmail, and is enjoying a huge success.
Despite that Google should continue doing what they are doing so well and that is indexing and evaluation of billions of web pages every day superior than other search engine companies, it also should maximize the marketing potential of going public. At least a month or two are for them before the stock is actually traded, since they just proclaimed the release a few days ago.
Google should continue to use innovations in its operation and production. Google hires the best of the best who uses new technology to come up with useful tools for everyday use. A wide variety of services available to businesses pushes its boundaries in the web world. The new creative features Google will develop and offer to the public will demonstrate an important role in their reliable success.
Lastly, the company is recommended to benchmark. Google has many competitors both locally and internationally so it could try to assess the operation of its process and then match it to what its competitors have and thus identify the areas that need upgrading and how they can be improved.
References
CNBC, 2014. 10 Notable Google Acquisitions, Retrieved from http://www.cnbc.com/id/48569184
GOOGLE INC (NASDAQ:GOOG ) / Ratios and Returns, 2014. Retrieved from https://www.google.com/finance?q=nasdaq:goog
Google Inc., 2014. Retrieved from http://www.google.com/about/company/
Google Investor Relations 2013, 2014. Retrieved from https://investor.google.com/
Reuters, 2014. Google Inc (GOOG.O), Retrieved from http://www.reuters.com/finance/stocks/companyProfile?symbol=GOOG.O
Yahoo Finance, 2014. Google Inc., Retrieved from https://finance.yahoo.com/q?s=GOOG
