Further Comments on Google’s Q4 2013 Conference Call

Here are some other highlights, for me, from Google’s Q1 2014 Conference Call: (all quotes are transcribed from the webcast)

On the Nest Acquisition:
An analyst by the name of “Jordan” from Morgan Stanley asked “You didn’t talk much about Nest, and so we were curious whether you were primarily interested in their design team, or product, or something else?” In Patrick Pichette’s curious answer (he didn’t directly answer the question, but talked about a “common vision” between the two companies and Google’s ability to help Nest “scale”). The last few words ” . . . and being able to attract people like Tony and Matt to the team is really wonderful” are what made some better sense to me.

Nexus 5 Was a Very Popular Smart Phone During the Quarter:
This same analyst from Morgan Stanley also asked about the revenue contribution to the “Other Revenue” segment from Chromebooks and the Chrome O/S. Mr. Pichette used this question to provide further information about the sources of Google’s “Other Revenue” business segment. The year over year growth of the segment was less than 100%. The hottest products in the segment included the Google Nexus 5. Mr. Pichette described sales of this product, during the quarter as ” . . . very strong for us”. The Nexus product line is a curious joint venture where Google selects an Android OEM’s design; the OEM manufacturers the product; but the product is sold under the Google Nexus brand, through Google. I think it’s likely the Nexus type of product is more to the likening of really big Android OEMs, including Samsung, than was the case when the Motorola Mobility division of Google actually competed, as just another Android OEM, in the market.

Revenue from Chromebooks Isn’t Booked, But Google Threw More Sales and Marketing Dollars Behind the Product for the Quarter:
The second part of the question posed by “Jordan” from Morgan Stanley was about Chromebooks. Here’s his question: “On the ‘Other Revenue’ line, what was the contribution to the ‘Other Revenue’ line from Chromebooks, or Chrome, otherwise, in the enterprise?” Mr. Pichette replied: ” . . . You’ve got to remember that most of the Chromebooks are actually sold through other parties, we’re really a facilitator, so we don’t book revenue on the Chromebooks.”

Some 10 minutes later in the call a related question was posed by Justin Post of Merrill Lynch: ” . . . and then Sales and Marketing went up quite a bit in Q4, I’m wondering if that was related to Motorola” Mr. Pichette replied as follows: ” . . . Sales and Marketing in Q4 was just really tied to the holiday season. We had great momentum on the Nexus 5 and the Chromecasts, and, so at that time of year we decided when we have such winner products, we would actually support them, in addition to a number of other areas where we actually invest. So very very pleased with the performance of both of those, and as well as Chromebooks, which have been, you know, if you look in the press the feedback you get is number one, number two in so many markets. So very very pleased on making this investment in these core products”. (ibid)

It would be interesting, I think, to learn more about how Google monetizes the “core product” Chromebook sales if they are not booked to revenue.

Disclaimer: I have no investment in Google.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2014 All Rights Reserved

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