Dont matter what Goldman Sachs believes about Watch. They have no idea what Apple's timetable is.
But Android which Wall Street loves to praise as the second coming is an utter failure. Google makes less money on Android than Apple makes on Macs. And I mean MUCH less. Mac revenue is about $20 billion a year. Android is $3 billion.
How did you arrive at the figure? What did you include? Google Play app sales? Ad revenue from Android devices? What about in-app ads? The added value for their own services like maps and mail? is there a breakdown somewhere on what contributed to that $3B you know they earned?
IMO this move is to hide Google's inability to grow their Search/Advertising business.
Bottom line is Google still gets the bulk of its advertising revenue from desktop search. And desktop search is constantly shrinking each year. Google is failing in mobile search. They only get about $3 billion in Android search. Facebook will surpass that number this year.
Google makes another $10 billion on iOS search/adverstising. But that money train could stop anytime now if Apple decides to remove Google as the default search. So what are you left with? A company that makes 90% of its revenue from search yet is losing desktop search revenue because of the move to mobile and losing mobile because of the move away from iOS. Google is a few quarters away from flat or negative earnings growth. They can't cook the books anymore.
So they split the books.
By having 7 companies they can show that 6 of their 7 companies are growing revenue at a fast rate. They can show Nest, Fiber, ect all showing nice revenue growth and can set pie in the sky expectations.
But the truth is those other companies make miniture revenue compared to advertising. And even if they grow 100% a year it will not offset the shrinking advertising revenue.
Did you read the SEC filing? What will the reporting requirements of each of the companies be? Seems like it will be a lot easier for investors to see the revenue and relative benefits of each of them, not harder.
This is what companies do when they have trashed their brand. Since Google Ads still remains their primary source of income it will continue to fuel their haphazard experiments, they're merely looking to distract from that experimentation, which has had a negative effect on Google stock, and an over-hyped source of vapourware.
Amusingly Sergey even tries to spin Google's rip-offs and loss-leaders as ideas "that seemed crazy at the time", sorry Sergey, but Maps, YouTube, Android and Chrome were never "crazy", three are acquisitions of popular products and the fourth is a fork of a popular open source project, none represent any real risk and each don't produce meaningful profit on their own, rather they are loss-leaders to put google ads in front of users.
$40, not 40 points. A point is not a dollar, especially when you are referring to things like "basis points".
I get what you're saying and technically you're correct...just that lots of guys on Wall St. use the terms interchangeably when referring to movement in a stock's price (1 point = $1). I'm used to hearing it said that way, that's all.
Not sure why it makes sense to keep Android inside a search engine company when they could be spun off into its own independent subsidiary and have nothing to do with search. After all, Google makes more ad revenue off PCs and iOS devices. Unless of course, an independent Android, Inc. wouldn't generate any licensing revenue, and always show a net loss.
My first thought is Google is separating businesses according to whether they are making money. Remember Google bought Motorola then sold it off mercilessly? Before it sold Motorola it treated Motorola employees not as Google employees. So after this new divorce people working outside of Google is no longer called Googlers? The article is too vague. Is the self driving car division under Google or not? What is the criteria? How about in the future? Will Google continue working on things outside of its core business?
My final thought is outside of Google core business really worth very little. So this is a gimmick fooling the street.
Goldman Sachs believes the Apple Watch is failing sales expectations too. You really think their estimates are pretty accurate?
EDIT: I realized how jaded by big numbers some folks have become to use the word "only" when discussing $3B revenue. Who here would be unhappy having $3B?
A rare occasion one of your responses made me chuckle! :-)))
Did you read the SEC filing? What will the reporting requirements of each of the companies be? Seems like it will be a lot easier for investors to see the revenue and relative benefits of each of them, not harder.
I heard the only thing being reported is Google and Alphabet. I will be shocked if we see individual revenue and profit figures for Fiber, Nest, etc. I'm not surprised though that they kept YouTube with Google. Will make Google look better.
Depends on whose focus is being discussed, I guess. Page and Brin become the "overlords" of all of these diverse companies, but how many of them are making a profit? Most of them aren't. Where are they getting their funding? From the currently profitable Google.
BRIN: "…the whole point is that Alphabet companies should have independence and develop their own brands."
In 20 years, Alphabet will change its name to Skynet as its artificial intelligence achieves singularity. By then climate and life support systems on this earth will be so hostile to holocene adapted plants and animals, such as humans, that the robots will have an easy job of things.
This may not be such a dumb strategy. Look at the market reaction after hours. It can change incentives within the company quite dramatically, and people are more directly held accountable for their successes or failures.
As I have said before, given its size and increasing complexity, Apple may need to consider doing something similar soon: hardware + software + services. Or, hardware + ecosystem.
Apple is successful for many reasons - one of them is they are NOT sliced up into separate entities. All oars row the boat...They are remarkably agile and responsive for such a massive company, because of this.
If something doesn't work, any or all divisions have an active responsibility to fix the issue and right any wrongs. In a walled garden, it is much harder to accomplish things because there are separate motivations.
The key is having a focused business model, with strong overlap and reliance between product service efforts. Apple has that in spades.
So Android only makes about 4% of Google's total revenue. Pathetic. I'm sure Android costs BILLIONS to keep running. So they are basically not making any profit from Android. Google makes the majority of its advertising revenue from iOS devices and Windows/Mac search.
To give you a comparison Mac is about 12% of Apple's revenue. Compare to Android is only 4% of Google's revenue. In fact Mac made more revenue in ONE QUARTER than Android made in an ENTIRE YEAR.
This and your post below about Apple search explain Android fairly accurately.
At the time Google bought Android, Microsoft was the big fish in the pond and they were very aggressively trying to shut Google search down. They had just started their own horrible search engine and were trying to force it upon their users. When MS lost a lawsuit saying they had to make alternate search engines available, they went cheesy and added dozens of noname search engines hoping Google would get lost in the list and people would use Microsofts default.
Apples iPhone was starting to take off and Google was a "bit" sharper then Balmer in recognizing that mobile was going to dominate, and with Gates being a major Apple shareholder they were vulnerable to having Google search locked out of both Windows and mobile.
They bought Android, made it open, and gave it away free. They needed it to proliferate rapidly. Its only goal was to ensure nobody could lock out Google search.
Android is integral to Google search. Arguing that it doesn't make money would be a little bit like arguing that Apple should get rid of iOS because it doesn't make any money- yet they spend a fortune developing it. Apple continues to develop iOS because it ensures they make money off their main product- hardware. Google maintains Android to ensure they make money off their main product- search. The fact they can make money from search on other platforms as well is a bonus and substantial advantage for them.
Comments
This move is called "shuck and jive".
NO coincidence about the similarity between Apple/AAPL and Alphabet.
"Now you know your ABC's..."
Chairman of Alphabet
The Big A!
This is what companies do when they have trashed their brand. Since Google Ads still remains their primary source of income it will continue to fuel their haphazard experiments, they're merely looking to distract from that experimentation, which has had a negative effect on Google stock, and an over-hyped source of vapourware.
Amusingly Sergey even tries to spin Google's rip-offs and loss-leaders as ideas "that seemed crazy at the time", sorry Sergey, but Maps, YouTube, Android and Chrome were never "crazy", three are acquisitions of popular products and the fourth is a fork of a popular open source project, none represent any real risk and each don't produce meaningful profit on their own, rather they are loss-leaders to put google ads in front of users.
$40, not 40 points. A point is not a dollar, especially when you are referring to things like "basis points".
I get what you're saying and technically you're correct...just that lots of guys on Wall St. use the terms interchangeably when referring to movement in a stock's price (1 point = $1). I'm used to hearing it said that way, that's all.
Not sure why it makes sense to keep Android inside a search engine company when they could be spun off into its own independent subsidiary and have nothing to do with search. After all, Google makes more ad revenue off PCs and iOS devices. Unless of course, an independent Android, Inc. wouldn't generate any licensing revenue, and always show a net loss.
My first thought is Google is separating businesses according to whether they are making money. Remember Google bought Motorola then sold it off mercilessly? Before it sold Motorola it treated Motorola employees not as Google employees. So after this new divorce people working outside of Google is no longer called Googlers? The article is too vague. Is the self driving car division under Google or not? What is the criteria? How about in the future? Will Google continue working on things outside of its core business?
My final thought is outside of Google core business really worth very little. So this is a gimmick fooling the street.
So they can come before Apple in the phone book?
What's a "phone book"? A book full of phones? /s
Goldman Sachs believes the Apple Watch is failing sales expectations too. You really think their estimates are pretty accurate?
EDIT: I realized how jaded by big numbers some folks have become to use the word "only" when discussing $3B revenue. Who here would be unhappy having $3B?
A rare occasion one of your responses made me chuckle! :-)))
This is the key takeaway though right?
I heard the only thing being reported is Google and Alphabet. I will be shocked if we see individual revenue and profit figures for Fiber, Nest, etc. I'm not surprised though that they kept YouTube with Google. Will make Google look better.
Interesting first take from Jan Dawson:
http://www.beyonddevic.es/2015/08/10/making-sense-of-googles-alphabet-move/
In 20 years, Alphabet will change its name to Skynet as its artificial intelligence achieves singularity. By then climate and life support systems on this earth will be so hostile to holocene adapted plants and animals, such as humans, that the robots will have an easy job of things.
This may not be such a dumb strategy. Look at the market reaction after hours. It can change incentives within the company quite dramatically, and people are more directly held accountable for their successes or failures.
As I have said before, given its size and increasing complexity, Apple may need to consider doing something similar soon: hardware + software + services. Or, hardware + ecosystem.
Apple is successful for many reasons - one of them is they are NOT sliced up into separate entities. All oars row the boat...They are remarkably agile and responsive for such a massive company, because of this.
If something doesn't work, any or all divisions have an active responsibility to fix the issue and right any wrongs. In a walled garden, it is much harder to accomplish things because there are separate motivations.
The key is having a focused business model, with strong overlap and reliance between product service efforts. Apple has that in spades.
If Android is spun off it would expose that it is a business that makes very little money.
Google will make about $70 billion in revenue this year. Goldman Sachs estimates that Android only makes about $3 billion in revenue.
http://www.businessinsider.com/goldman-sachs-says-android-is-making-google-very-little-money-2015-4
So Android only makes about 4% of Google's total revenue. Pathetic. I'm sure Android costs BILLIONS to keep running. So they are basically not making any profit from Android. Google makes the majority of its advertising revenue from iOS devices and Windows/Mac search.
To give you a comparison Mac is about 12% of Apple's revenue. Compare to Android is only 4% of Google's revenue. In fact Mac made more revenue in ONE QUARTER than Android made in an ENTIRE YEAR.
This and your post below about Apple search explain Android fairly accurately.
At the time Google bought Android, Microsoft was the big fish in the pond and they were very aggressively trying to shut Google search down. They had just started their own horrible search engine and were trying to force it upon their users. When MS lost a lawsuit saying they had to make alternate search engines available, they went cheesy and added dozens of noname search engines hoping Google would get lost in the list and people would use Microsofts default.
Apples iPhone was starting to take off and Google was a "bit" sharper then Balmer in recognizing that mobile was going to dominate, and with Gates being a major Apple shareholder they were vulnerable to having Google search locked out of both Windows and mobile.
They bought Android, made it open, and gave it away free. They needed it to proliferate rapidly. Its only goal was to ensure nobody could lock out Google search.
Android is integral to Google search. Arguing that it doesn't make money would be a little bit like arguing that Apple should get rid of iOS because it doesn't make any money- yet they spend a fortune developing it. Apple continues to develop iOS because it ensures they make money off their main product- hardware. Google maintains Android to ensure they make money off their main product- search. The fact they can make money from search on other platforms as well is a bonus and substantial advantage for them.
or, in an Ordered Key / Value Store ...