|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
conference date: July 20, 2006
for quarter ending: June 30, 2006 (2nd quarter)
Overview: Another quarter of rapid increase in revenues and earnings per share. However, I believe this stock is still priced assuming short-term future perfection, and beware of capital expenses going forward.
Basic data:
Revenues of $2.46 billion, 9% sequential and 77% annual growth. GAAP net income of $721 million or $2.33 per share. Non-GAAP net income of $772 million or $2.49 per share.
Ended with $9.82 billion in cash and equivalents.
Guidance: Q3 traffic levels will reflect slower seasonal patterns, continued benefits from ad quality initiatives.
Conference Highlights:
New products are coming at a fast and furious rate. Partnerships are tremendously important as seen in the Dell and Adobe deals; cannot create a healthy ecology alone.
Europe is driving most of the growth outside the U.S. Emerging markets and Asia are growing strongly, but still represent a small percent of revenue.
Traffic acquisition costs were $785 million, or 32% of ad revenue. Operating expenses were $652 million. Increase sales and marketing and R&D and will continue to increase due to aggressive hiring and distribution deals. $699 million in capital expenses, much was real-estate purchases, the rest was data center builds. Anticipate continued rapid capital expenditure.
Localizing products for international users, like language-specific toolbars. Targeting mobile (cell phone) market internationally. TV ads are now being run on Google.
Q&A:
International search quality? In Europe is very similar to U.S. Ad biz is strong.
Google Checkout model? Only a couple of weeks in operation. Higher value for advertisers, but is an indirect benefit to Google revenues. Mainly adds to ad network. Will not rent or sell user data from it.
Vertical categories like Google Finance? Should be the case ads have better value.
Display ads with AOL? Running a lot of tests with advertisers and partners. On track, but early in process.
Revenue share philosophy? Majority of value from ads goes to partner. But then advertisers are part of overall google.com network.
Video rates of growth? Lots of premium partnerships as well as user-uploading, but still in learning mode.
Landing page quality score? Trying to improve user experience.
Ad sense for radio? Worldwide, interesting deals being negotiated, but first results three months from now.
Healthcare vertical? Many companies and organizations have approached Google. Partnered with a variety of organizations to improve health search results (more authoritative or informative).
Market share? Direction is "doing really well." In some nations more localization is needed. Recently opened engineering and sales offices in Russia.
9% growth rate for quarter was due to ad quality improvements.
Net neutrality? Believe it is best for everyone, for all the small Internet companies. Today Google itself would not be very effected if net neutrality ended.
Already a great deal of complexity in kinds of ads, kinds of payment models, kinds of advertisers.
Capital expense: thinks cannot put too much into the system. Rate will accelerate.
OpenIcon Analyst Conference Summaries Main Page
Disclaimer: Our analyst summaries may include both our condensations of statements made by company representatives and our own analysis. They are not covered by any warranty. We cannot guarantee anything said by company representatives is true. Before making or terminating an investment you should always verify any factual basis of your decision .