Google's investment in "other bets"

Google’s earnings disappointed yesterday. They cited two factors

  1. Impact from foreign currency and a strong dollar
  2. An uptick in costs for “other bets”

Google’s stock was down about 6% after the earnings results showed Alphabet Inc. 's consolidated revenue rose to $20.26 billion from $17.26 billion and earnings per share excluding one-time items reached $7.97. Both things fell just short of analyst expectations. Google CFO Ruth Porat cited a negative foreign currency impact of $762 million, due to the strong US dollar but also reported a larger operating loss from Alphabet’s “other bets” of $802 million, up from $633 million.

Other bets include GCP (Google Compute Platform) and Google Fiber. From the articles I’ve read these are the two areas seeing the most investment this year and going forward.

Would anyone care to translate that investment spend into how much DTN-X and Cloud Xpress needs to be purchased? I don’t have the facilities to do that myself - but I can help with the research.

Another topic on the earnings call was around their video segment. They talked about viewers of YouTube videos growing significantly. Again, I do not know how to translate that video demand into how much bandwidth access must be purchased (by Google) from wholesale carriers to distribute. As we heard from Infinera, bandwidth demand translates to revenue dollars any time we see it - because the ICPs are purchasing that bandwidth from enterprise carriers through exchanges and connection hubs to deliver it to the end user.

Of course that video demand doesn’t stop just at Google. Netflix, Hulu and Amazon are also driving a large portion of that video demand, along with Facebook as an emerging contributor.




I wonder if Google is in the business of “diworsefying.” It’s quite a common problem when they don’t know what to do with the excess cash flow. They should give it back to the owners, the shareholders. Of course, with the two classes common share common share, the outside shareholder is taken for a ride.

I stay away for companies that discriminate against the outside shareholder. If they want my money but not my vote they can offer me bonds.

Denny Schlesinger