Google’s Smooth Sailing in First Quarter Acquiring Motorola Mobility

Google’s first quarter as a hardware company, as well as a search engine, was a good one. Stand alone revenue for the company was up 21% with cumulative revenues, including its revenues from Motorola Mobility, up 35% to $12.2 billion year over year, and up 15% quarter over quarter. The revenues from Motorola were simply $1.3 billion for the quarter.

Although the earnings call did not give much guidance on its future in hardware sales, the Motorola Razr sold very well. As reported by Reuters, “Investors have a wide range of questions about Google's expansion into the hardware business, where margins are low and competition with the likes of Apple Inc and Samsung Electronics is fierce.” There are also questions if Google will design a hig-end mobile phone that can rival Apple’s iPhone.

The Chief Business Officer highlighted YouTube’s broadcasting of the London Summer Olympics which should provide a big bump in viewership. Quoted from the earnings call, “Thousands of partners are making six figures [through YouTube].”

The core business of Google is search advertising which has been undergoing pressures of lower cost per clicks which translates into lower margins for the company. Quoted from the Reuters article, “The cost per click for Google's online search ads continued to decline in the second quarter, falling 16 percent year-on-year. But some analysts highlighted a quarter-on-quarter 1 percent gain in second quarter CPCs.”

Integration of Google applications was also highlighted. The so-called “knowledge graph” shows a cluster of information and related topics that aggregate from a search term.

Also noteworthy things include the all-new “jelly bean” operating software from google which is reaching critical mass. What’s more, Google Play has exceeded its twentieth million download.

Investors were very well pleased with Google’s quarterly results pitching the stock higher by just over 2% in regular hour trading, and an additional 2.72% to $609.20 a share in after-hours. Investment research from Morningstar gives Google’s stock 4 out of 5 stars, citing the challenges to succeed in its acquisition of Motorola Mobility. Their search advertising dominance leaves researchers with conviction that it will persist.