Google 1q09 results

Overview:
It is one of the world's largest internet company specializes in online searching & advertising with over 60% global market share.

It's major revenues are coming from advertisement programs: AdWord (auction-based program that lets businesses display ads along with particular search results) & AdSense (enables websites in the company's network to serve targeted ads, based on search terms or web content, from AdWords advertisers, most of the revenue generated through AdSense is shared with network partners).

1q09 results (vs 1q08 or 4q08)

1. Revenue up 6.2% to $5.5B from 1q08 & down 3.4% from 4q08

• Revenue excluding the negative currency impact up 12%, in line with my expectation;
• In 1q09, Google has improved its search engine on key-in search error
• Google response to the weak economy during its earning conference call: significant increase on searching key words such as "bankrupkcy", "unemployment", "spiritual", "gambling" and "alcohol".
• You can see people are worry!! People are searching the ways (healthy and unhealthy) for comfront;
• In the uncertainty days, People need Jesus Christ. Let me share a song that I really like, "Hear O LORD!" (attached to follow)

2. Reported EPS up 8.2% to $4.51 from 1q08 & up 269.7% from 4q08

• Google did an excellent job in its expenses management (partly thanks to its new CFO from Bell Canada) with laid off too many of its employees;
• Research & development cost down 4.6% and down 12.4% in 1q08 & 4q08;
• Sales & marketing cost down 2.9% and down 14.2% in 1q08 & 4q08;
• Operating margin up to 34.2% from 29.8% & 32.6% in 1q08 & 4q08;
• There is some special one time adjustments on SARs & impairment charge, the adjusted EPS is $5.16 & $5.11 in 1q09 & 4q08;

3. Balance Sheet

• Total equity up 22.6% to 29.9B from 1q08 & up 5.7 from 4q08;
• Cash & market securities up 46.6% to $17.8B & up 12.2% from 4q08 with no long term debt at all. It reflects a extreme strong cash position.
• On the other hand, interest income is poorly low, Google needs wise decision on cash management. 1) how Google can generate higher financial income and 2) smart acquisition on barginning deals.

Risk

• Bad economy usually hurt advertisement industry;
• Face direct competition from Yahoo & Microsoft;
• Low cost for advertisers and internet users to switch from one online search engine to another;
• Stock compensation plan looks consistently too high compare to other companies;
• AdSense gave away majority of its income to network partners may lower profit margin and lower long term growth rate;
• New product such as Google phone may have lower profit margin;

Bilibala with Google:

• I use Google as my primary search engine;
• I use Gmail as my main email address;
• I browse through & watch Youtube almost everyday;
• This blog is one of Google's free-to-user product;

Comments:
BUY, fair value $1,050 (before discount) & $550 after discount, but in short run, I think it is hard to rise above $500.


Other info:
Google continues to expand its search market share lead according to data released Wednesday by comScore.

According to comScore’s measurements, Google’s share of U.S. searches in March 09 was 63.7%, up from 63.3% in February. Yahoo and Microsoft both remained essentially static in March, down .1% to 20.6% and up .1% to 8.2%, respectively.

comScore also says the number of searches conducted overall was up 9% during March.