"Let us look and focus on the full year, the company had revenues of 66 billion Dollars and recorded net income 14.444 billion. Net income per diluted share was 21.02 Dollars, the share price closed at 534.52 Dollars (up 4.67 percent) on Friday. It is fair to say that growth is slowing off their ever increasing base and that the company is nearly 90 percent reliant on advertising, with "other" chipping in around 11 percent."
To market, to market to buy a fat pig. It was a decent day for equities markets on Friday, there was a pleasing read on our trade balance, we recorded a trade surplus of 6.848 billion Rand. In other words the value of the exports were greater than the value of our imports. For the full year however, our trade deficit, accumulated was a whopping 95.3 billion Rand. Another 93 cent drop in the price of petrol will no doubt do wonders for Joe Consumer. The petrol price, if it were to fall just a little more, just a little, would be below 10 Rand here on the highveld for the first time since .... well, I have not been keeping a record. Lucky for us, we have the internet, according to the AA website -> Fuel Pricing, the last time we were at these levels was September of 2011. So, Mr, Ms and Mrs consumer gets a reprieve from rising prices elsewhere. Thanks to human innovation and no thanks to more laws and red tape.
How much longer the oil price will stay at lower levels is a guess for most. What I do know is that the oil rig (onshore) count is falling like crazy. Lower prices have led to many of the marginal farceurs to pull the plug, no more exploration for now and let us conserve cash like crazy, the cash crunch storm is coming for many of the independent producers. It is going to be just as rough, if not more so for the oil services businesses, they must have geared up, more rigs, spent more and now are stuck with equipment that they do not need. So whilst consumers have more money in their pockets as a result of lower natural gas and all petroleum products prices, the flip side is that capex spend from the oil and gas industry (and the broader sector) is plunging. I found via the inter-webs a Baker Hughes rig count page (it has gotten wildly popular). Check it out - > Rig Count. This is the weakest week since the company started publishing data in 1987. Weak week.
So what does that mean? For starters, the oil production from US fields, as you can see from the Bloomberg story titled U.S. Oil Drillers Idle 94 Rigs in Biggest Retreat Yet, the most in a week since 1983. See that part: "U.S. oil production has continued to climb, reaching 9.21 million barrels a day in the week ended Jan. 23, the most in weekly data since at least 1983, Energy Information Administration data show." Wow. So whilst exploration might be slowing heavily, production is not. As we all know well, the time difference between the one and the other works in exactly the same way as a price spike and bigger volumes. Ask your favourite farmer friend about this, they will tell you when the going is good, it is very good, when the going is bad, there is nowhere to hide.
Google. You can use it as a verb. As in the "old" days when I asked my pops what something is or was, he said, go look in the dictionary or the encyclopaedia. Now days you can use the company name as a verb, in other words, go Google it! The company turns 17 this year, in September, the founders Larry Page and Sergey Brin are still at the helm, the ex CEO and now chairman, Eric Schmidt is still large and in charge at the business. Recently Google has had some slippage, some questioning that they only have the one business. Whilst looking at their business revenues, it becomes clear that it is all about internet and search.
Check out their recent results: Google Inc. Announces Fourth Quarter and Fiscal Year 2014 Results. These results were from last week after market close Thursday. Let us look and focus on the full year, the company had revenues of 66 billion Dollars and recorded net income 14.444 billion. Net income per diluted share was 21.02 Dollars, the share price closed at 534.52 Dollars (up 4.67 percent) on Friday. It is fair to say that growth is slowing off their ever increasing base and that the company is nearly 90 percent reliant on advertising, with "other" chipping in around 11 percent.
There is plenty to this business that is good, their openness (not everyone thinks so) around their software and "free" (you need the internet) usage of most of their services certainly makes life a whole lot easier than before. To search for something, to navigate (maps), to view a place (street view), to browse share prices (finance) has never been more free or easier. Google translate is a big one too.
YouTube is huge and will continue to become bigger, whilst the company does not compartmentalise the different businesses that earn advertising revenues elsewhere, it is clear that online video watching is becoming bigger and bigger. Millennials are used to consuming data this way, it is easy to upload clips to YouTube. I upload "stuff" to Facebook all of the time. YouTube itself is the third most visited website in the world, after Google and Facebook. I think that Google have struggled more in the smartphone era, there are many more apps that allow you to perform basic functions that perhaps you would have used Google for in the past. It is still very powerful, many young people associate Google as the starting point for the internet.
The share price performance has been weak against a market that has been strong, Google is down over 9 percent in the last calendar year, the nerds of NASDAQ are up nearly 13 percent over the same time period. That is a massive underperformance. The risks here is that the company is a "one trick pony". They have tried with several huge ventures and failed, realising when they needed to cut the programs. Google Glass could have had massive sales, I guess the part about you speaking to yourself is a bit weird. The Wikipedia entry for the product says "Google glass was ... " in the past tense, meaning the product production has been shelved for now, the actual product will be tweaked and explored further, perhaps a second release with more fanfare at a later date. They are not the only major to fall short, I can think of several products from Amazon that have fallen flat.
Google X is the companies research department, it is kind of secret. Kind of lacks conviction, the company likes to view their Google X venture as the arm that encourages new ideas and new thinking, hopefully to invent the next best thing from artificial skin, to drones, to self driving cars, internet services from balloons and Google contact lenses to check diabetes patients and make sure that they are in check with their health and glucose levels i.e. be ahead of the curve in a non invasive way. Google X is not their core business, it does of course encourage creativity and research.
The main question is, has the company "lost" their mojo, or is the pace of internet search levelling off somewhat, if 20 percent growth counts as levelling off. I guess with 53,600 employees the company could not be regarded as entrepreneurial in nature, how is it possible to categorise the company as such? More than one sixth of the company market capitalisation is cash. The expectation is that the company will have around 100 billion Dollars in cash by the end of next year. I do not think that the company is going to blow the socks off estimates this year and as such it is not a screaming buy at these levels. If however you want to own a company that will continue to innovate and push boundaries, whilst trundling along with their gargantuan online advertising platform in the background, I would say that any sign of weakness is an opportunity to acquire more. Buy on weakness.
Things that we are reading, you should too
Apps disrupt our lives in a number of ways, here is another way - The $7 Coffee: How Payment Apps Make Us Tip More and The 1 Weird Reason You're Tipping More. A combination of not wanting to look cheap, ease of purchase and clever app programming have the average person tipping $2 for a $4 coffee!
Location, Location, Location is less important now than ever before - The end of geography
If you don't back yourself no one will. I found this on twitter last week and found it very interesting. 
Home again, home again, jiggety-jog. Passing shot across the bow. Did you see that in the US, The Federal Communications Commission revised their measurement of what constitutes broadband benchmark. 25 megabits per second download and 3 megabits per second upload speed. What is pretty astonishing however is that 92 percent of urban Americans meet this standard. What are your speeds? We would not qualify here at Melrose Arch, we would be in the category of dialup. Err... how does that make you feel? Mr. Market is flat here, there were a few PMI reads across Europe that were soft in spots, beats in others and as a collective inline.
Sasha Naryshkine, Byron Lotter and Michael Treherne
Follow Sasha, Byron and Michael on Twitter
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