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Google Earnings Reveal $3.6 Billion Lost On 'Moonshots' In 2016 (cnn.com)
Thursday Google revealed earnings results for 2016 showing the total loss for their "other bets" division had reached $3.6 billion. An anonymous reader quotes CNN :
The "other bets" portion of its business includes ambitious projects like self-driving cars, life sciences research and high-speed Internet access... Alphabet shuttered a project to beam Internet to rural areas with solar-powered drones, halted the expansion of its costly Google Fiber effort, and forced Nest to cut costs and pay for its own legal and PR expenses. At the same time, the company has moved other moonshot projects closer to market. In December, Alphabet spun off its self-driving car program into a separate company called Waymo and began working on partnerships with automakers.
Google's CFO says going forward they'll "continue to calibrate the magnitude and pace of investments".
Google's CFO says going forward they'll "continue to calibrate the magnitude and pace of investments".
But the ones that do more than pay for the ones that don't
News at 11
It's crap like this that's why we can't have nice things. Specifically, Google Fiber is not a loss. Accountants put it on the books as a loss, but it's not. It's just an expensive investment in physical plant with a long payoff period. It may takes years, even decades, but it's not like people are going to stop using this new-fangled thing called the Internet.
Wall Street has been the death of American innovation. If money spent doesn't earn a profit in the next quarter, Wall Street doesn't like, it, doesn't want it, and doesn't understand it. The stock price of Tesla Motors is a fine example. Here we have a company investing hugely in physical plant, and Wall Street has no idea what to do with it, so the value of TSLA fluctuates by 50% of its value, all the time. So-called "financial analysts" don't even know how to talk about it. It doesn't fit into their neat little boxes.
(And there's a job that's just ripe for automation. It wouldn't even take a sophisticated neural net. 90% of the financial "analysts" in the world could be replaced by some templates and a bucket of Markov chains, driven by a small shell script.)
So Google will shut down Fiber, having utterly failed to modify the behavior of the incumbent ISPs. And we will all pay for it. And pay and pay and pay and pay... It's Comcastic!
While I question the viability of some of the projects, I hope Google continues to push ahead with R&D. So many companies are one hit wonders because their big investors want to milk the companies for short term profit. One the companies is killed off and the corpse picked clean, they move on to a new victim. When Amazon plowed into cloud services, the outcry from many was immediate from those looking to make a fast buck. By plowing earnings back into R&D and taking paper losses, Amazon was looking beyond just being an online reseller. A decade down the line, AWS was probably one of the smartest bets ever. The profits are greater than the other low margin business can offer.
Seriously, the bulk of the loses is because they sold these items prior to bringing them to fruition.
The CEO, Sundar Pichai, should be nuked for his stupidity.
I prefer the "u" in honour as it seems to be missing these days.
Apparently, most of that money went toward ammunition for actually trying to shoot the Moon, until someone Googled "moonshot". After that, they also Googled "moonshine" and then sold their stock in rock polishing products.
It must have been something you assimilated. . . .
Things aren't what they used to be. And they never were.
Are the people of today greedier, than they were 50 or 100 years ago? Can you substantiate such a claim?
The end? Oh, no! Clearly, what we are witnessing is a market failure — KKKapitali$m is revealed once again to be inherently incapable of providing Internet-service to the poor via solar-powered drone — which means, it should be nationalized. Then, the selflessy well-paid unionized workers, lead by the omniscient government officials will secure the human rights of the downtrodden.
In Soviet Washington the swamp drains you.
My brother is an analyst. It would appear that part of his job is tending to AI platforms. https://www.linkedin.com/in/oc...
"You forget just how anti-Internet Microsoft is [in] the Seattle area."
Could you explain that? How is Microsoft anti-internet? How does Microsoft affect what people do in their private lives?
Wikipedia says Sundar Pichai, CEO of Google was given that position in October 24, 2015. The reorganization of Google into Alphabet was completed on October 2, 2015, only one year and 3 months ago.
Interestingly, Wikipedia says Sundar Pichai's salary is $150 million per year. It must be tough to survive on so little income. Maybe we should send him some money.
To me, the management of Google seems less and less competent. The management of Microsoft by Satya Nadella seems, to me and many others, UTTERLY incompetent: CNET Editor Rails Against Non-Consensual Windows Updates.
Why are incompetent managers from the culture of India being given leadership roles?
Tesla has $8 billion in assets and $7 billion in liabilities. They are currently worth $1 billion. Their stock valuation is $40 billion, the market values them at $40 billion.
Why the huge discrepancy in what they are worth in terms of assets and liabilities versus what people are willing to pay for the stock? It's not because they are making a bunch of money - Tesla is losing money at the rate of almost a billion dollars per year. It's because people think Telsa might make a lot of money ten years from now (and it's a sexy brand, which appeals to uninformed "investors").
> If money spent doesn't earn a profit in the next quarter, Wall Street doesn't like, it, doesn't want it
Your own example proves otherwise - Wall Street pays 40X the actual value for Tesla because they hope for long-term profits. Everybody knows Tesla won't make a profit this quarter, next quarter, or the quarter after that, but they are buying Tesla stock at a huge premium based on long-term potential.
However, using the example of Tesla or any startup to generalize about the market is silly. The vast majority of investment is in stable companies like General Mills, Johnson & Johnson, Procter & Gamble, Mastercard, etc. These are *investments* - General Mills had 34% return on investment last year. They've been making money for a long time, and will almost assuredly keep making money for a long time. That's an investment.
In contrast, Tesla had a negative 82% ROE last year. Hopefully one day they'll make a profit, maybe. Putting money in Tesla is *speculation*, not investment.
It's just an expensive investment in physical plant with a long payoff period. It may takes years, even decades, but it's not like people are going to stop using this new-fangled thing called the Internet.
It doesn't work like that. Unfortunately.
I want Comcast to die too, but if the free market is going to kill it then the people doing the investing have to be convinced that the payoff (adjusted for risk) is worth more than other projects they could invest in.
You can't ever say "eventually you'll make it back" and expect that to be a compelling argument. I mean, if it rate of return fails to keep up with AAA debt, it's an objectively stupid investment. And if the rate of return fails to keep up with inflation, it's an objectively losing investment.
The stock price of Tesla Motors is a fine example. Here we have a company investing hugely in physical plant, and Wall Street has no idea what to do with it, so the value of TSLA fluctuates by 50% of its value, all the time. So-called "financial analysts" don't even know how to talk about it. It doesn't fit into their neat little boxes. (And there's a job that's just ripe for automation. It wouldn't even take a sophisticated neural net. 90% of the financial "analysts" in the world could be replaced by some templates and a bucket of Markov chains, driven by a small shell script.)
No, the rational long-term valuations of Tesla (which are masked by a hell of a lot of noise, yes) are driven by things that expert systems can't grasp, namely the plausibility of electric dominating, the timeline of that domination, and whether Tesla will remain near the top or be overtaken and eclipsed by ICE car competitors switching to electric. And the people who've done serious research and calculations on these things tend not to talk all about it in WSJ interviews.
Without the rational long term valuations and long term investors, IPOs don't succeed and the short term investors and algorithm traders don't have any wave of genuine long term growth interest that they can try to predict and make money off of. (And without the short term traders, liquidity plummets, ultimately hurting the IPOs a lot.)
Good point. Apple CEO Tim Cook is another example of a manager who does not seem to be able to handle the enormous challenges of running a large company.
However, I think it is especially difficult for someone from a very different culture to manage a U.S. company.
It also fluctuates because it's investing hugely in physical plant far beyond it's projected needs - and because it's projected needs far exceed it's proven capacity. Then there's the doubts about about how many Model 3's will actually sell, and doubts about Tesla's ability to actually produce them in the large numbers ordered. Then there's their debt load (taken on to pay off the government loans 'early'). And their recent purchase of Solar City. And liability concerns over Autopilot. And their ongoing cash flow problems. And... Well, you get the picture.
And the picture is much more complicated than you paint.
Meanwhile, Amazon has barely been profitable, in a large part because of their enormous and ongoing investment in physical plant, with their ongoing net positive cash flow... and Amazon's stock prices have been doing just fine. Boeing, with a proven track record, has dumped billions into developing the 787 over the last decade - but their stock price has done just fine as well. Etc... etc...
Wall Street knows how to handle companies sinking enormous sums for deferred payout just fine. Tesla may be the darling of the geek fanboy crowd, but said crowd isn't actually very business savvy or financially well informed.
Look at all the money Bell Labs pissed away inventing the transistor. And what did their stockholders get out of that?
* Carthago Delenda Est *