Performance Of Google And Its Management

Performance Of Google And Its ManagementSince Google Inc. was founded in 1998 and incorporated in 2003, it has been rivet on technology innovations to help its practisers find the information with unprecedented levels of ease, truth and relevancy. Google primarily concentred on the areas of expect, advertising, operating strategys and platforms, enterprise and hardware products. These programs overwhelm AdWords, AdSense, Google Display and Google Mobile, with Android and Google Chrome serve as its operating system and platforms.Google generate revenues primarily through delivering advertising to promote products and services for chorees. on-line(prenominal)ly, it moves to crude area, except for providing specific features to nomadic device users, Google also operates in mobile segment, as it made an acquisition of Motorola Mobility Holdings Inc. (Motorola) on May 22, 2012 (acquisition date).Industry smirchGoogle Inc. competes with other players in the Internet Informatio n Providers application within the technology sector. Although there are competitors oecumenic, the key players are recognized as general search engines, much(prenominal) as Yahoo and Microsofts Bing, and social networks, such(prenominal) as Facebook and Twitter. Because of its years of focus on technology innovation and huge amounts of expenses in RD every(prenominal) year, Google has become the global technology attractor and one of nigh sanitary known general Internet search engine on the whole around the world.Comprehensive Analysis damp 1 liquidity government agency analysis (see gift 4 represent)Based on the statistics on Google Inc.s financial statements, there is a continuing increase in its revenues and net income, demonstrate a tremendous and over any vigorous festering path. Moreover, from the symmetry exhibit, from 2008 to 2009, Googles up-to-date ratio ( castrate from 8.77 to 10.62), quick ratio (from 8.03 to 10.08) and its forego cash flow (from1754 to 2510) each have a big jump. However, we every know that the severe worldwide recession happened at the analogous time period, it seems Google didnt feel the shock if we completely see from these numbers- scarce it is not true.On the one hand, the recession spread all told over the world, even the mighty search giants cannot escape from it. If we put a expressive style those annual numbers that only show final solvents, Google revealed its first disembowel in 2009 web search declined in sales, which forced Google to stupefy cutbacks in online advertisements spending. At the same time, Google announced two rounds of job cuts. Because of the actions of cutback on cost, Google last beat its 2009 profit expectations -this can be shown in Googles income statement exhibit, the nitty-gritty operating expenses of 2009 is $6494 million, which is refuse than $6542 million of 2008, given Google is expansion scale, it proves the focusings action of snip cost sharply.However, on the other hand, even influenced by recession, Googles sit slashors were relatively bullish than others, since Googles slowdown feather still looked good compared with the other players. Moreover, some investors and observers believed that the recession gave a golden opportunity for Google to increase its care for and gain to a greater extent shares in the overall market-since almost all of Googles revenue come from advertisements that are hardened next to customers search results, during recession, more and more businesses would choose cheaper advertisements to promote their products, such as Googles online Pay Per Click (PPC), rather than the traditional offline advertisement which apply to work well before recession. From this point of view, as their competitors in traditional media cannot keep up, Google got this opportunity to effectively mark off the online space. As a result, during recession, Googles liquidness situation improved as shown the increase of their curre nt ratio, quick ratio and renounce cash flow (as the reduced cost and shut down of some projects have released more capital that can be apply to reinvest).However, after the recession, from 2009 to 2010, we can see a rapid decline of its liquid state ratios (e.g. Current ratio from 10.62 of 2009 to 4.16 of 2010), this is because after recession, Google continued to reap the liftth of digital economy. It gave Google a huge opportunity to stretch in the market since the faulting of consumers and advertisers from offline to online continued unabated, and it fueled Googles suppuration in its core business-search advertising.If we look deeper to examine the causes for the fluidness ratio declines, it is simply the caution wanted to take unspoiled advantage of this opportunity, as Google decided to invest precipitously and heavily to make pass out rapid innovations in its search technologies. It also made big investments to ca-ca notable enhancements to search including Inst ant Previews, Google Instant and Place search. During 2010, Google invested $1.8 billion to stimulate products, services, companies and technologies. As a result of these huge investments made in 2010, Google fluidness ratios have a big drop, as well as its free cash flow. But this doesnt mean its competitive situation is weakened, on the opposite, these investments whitethorn have opened the doors for large amounts of future profits for Google Inc. and its stemmaholders.From 2010 to 2012, its current ratios and free cash flow have an overall increasing trend but are much lower than 2009 numbers. The quick ratio in 2012 is lower than that of 2010, this is because Google started to sell real goods, e.g. mobiles, so it had to rely on the inventory to be sold to convert to cash, so this reduced quick ratio. This might picture that Googles efficiency to cover its current liabilities by those pluss (which are expected to be converted to cash in the near future) is weakened, however , using benchmarking to compare with the industry average (industry average current ratio 3.2, quick ratio 1.52), Googles liquidity situation still plays as competitive advantage.Part 2 summation centering analysis (see troop 4 graph)From 2008 to 2012, Googles days sales spectacular (DSO) has increased from approximately 44days to 57days. DSO normally represents the average number of days it takes for a come with to collect outstanding receivables. The increasing DSO of Google indicates that there is a large amount of customers owing payments on its sales this will off Google uneffective to collect cash on its sales in time, also wear the risk of ending up with bad debts. It would also limit the companys ability to make reinvestment due to lack of cash. Moreover, DSO is a component of the Cash diversity Cycle (CCC), which is usually apply to determine how long cash is trussed up in working capital. Thus, a big DSO contribute to make a larger CCC, it will also deteriorate Googles growth and its value in the long run. While the reason that longer DSO appeared, it is mainly because the growth of international business in this search advertising market, competition is perplex awful that some of its precedentful customers are testing the paid search model, and they request longer payment terms. By this way, quotation terms of the company tend to be longer, as well as extended credit to certain big customers. This is a common issue for all the major players (e.g. Yahoo), so it should not degrade the management performance dependable by the increase of DSO.For the asset turnover ratios, we can see that the changes of it harmonize with the liquidity ratios as canvass before they go up in recession since a good use of the opportunity, decline sharply in 2010 as the huge investments for growth, and continuing increase from 2010 to 2012. This indicates Google is on a healthy growing path with its management making proper stopping points to deal with problems, and to invest for greater future profits.Part 3 Profitability analysis (see Exhibit 4 graph)As shown in exhibit, Googles Return on Assets (ROA) ratio goes up in 2009 as a peak, while decline all the way till 2012 after the peak. ROA shows the rate of return (after tax) that is earned on all of Googles assets regardless of its financing structure (debt/equity), it measures the management effectiveness using all stakeholders assets to earn profits for investors. The same trend shows in ROE ratios.For Google, this indicates that Google continues to ordain a lot of money to red-hot ventures that are not gainful off, as the declining shows that assets are growing much faster than profits. For example, Google acquired Motorola and expect to make money off the patents in the way of exciting hardware. Also, Google+ is relatively unsubstantial and potentially will be a cash cow, although Google+ is used as a defensive weapon to Facebook and other social networking business. The se kinds of segments of Google are drag down its ROA and ROE ratios. However, we can conclude that the declining ROA and ROE is basically derived from its aggressively expansion and investment, and Google is still showing growth every year, but the suspicion of the profitability of these investments will bring bigger risk for Google. At the same time, the decline in its returns can also indicate that revenues need to grow much quicker in the future to achieve its expected earnings. opposite profitability indicators of Google, such as operating margin and basic earning power are showing the same trend, exemplifies the causes analyzed above.Part 4 Debt management analysis (see Exhibit 4 graph)Googles debt to asset ratio shows a down in the mouth drop in 2009 and an overall increasing trend from 2009 to 2012. Combined with the asset management analysis in part 1, its reasonable to explain Googles high profits and faster growth in recession compared with other companies result in its assets increase more than debt. Also, after 2009 recession, continuing expansionary strategy follow by Google has driven large amounts of investments, as Google has to borrow more from its investors and creditors to reach the investment requirement, its debt grow more than assets and consequently increase its debt to asset ratio.Current performance of Google and its managementRecently, after the acquisition of Motorola that bring Google the Mobile segment, Google is spending a fortune to expand its already huge Googleplex site, such as preparing to break ground on a 42-acre campus. Most obviously, Google continues to diversify its business to move to mobile and shift to social networks. Google expects Motorola patents that it acquired can be used to develop a phone to compete with some big players such as Samsung and Apple, it has already tried to feature its Android service. It is also pitiful into the Internet market with Google Fiber to help acquire advertisements.However, as t he ratios and trends analyzed before shows that there are problems of short-term returns and higher risks, and fortunately the management has already recognized it. We can find that it has been revealed in Googles annual news report that the management are making good efforts to prioritize their products, they shut down a number of products in 2011, including Google Buzz, Google Desktop and Google Labs. The management has learned a lot from those discontinued products and are putting that learning to work every day in new products.To conclude, during recession, Googles management reacted properly and took good use of its online ads advantage, to gain more market. However, the aggressive investment to grow bring uncertainties to the returns, its management should pay more attention to this issue and operate Google business with more caution and conservation, thus maximize its standardholders wealth in the long run.Googles emerging Prospects SummarizationIt is obvious that Google h as strong ambition to diversify and dominate its products in different fields, as shown from its many historical acquisitions and its recent moves. Because of its fast growth model, their short-turn foreseeable profits are decrease, however, Google is still a technology leader in the field with unparalleled competitive advantages. If managed properly, Googles investments will bring approbatory returns in the future.Googles Corporate GovernanceCorporate organisation mainly focuses on the way that top managers operate and interface with its stockholders. For Google, its code of conduct is well known as dont be evil. However, concerning its investors interests, the corporate governance in Google is not optimistic.Since Google initially made the IPO, it has been using dual-share- affiliate structure, under which its shareholders can buy class A shares with one vote per share, while Google founders and co-president Larry Page and Sergey Brin and CEO Schmidt control the majority of its class B super-voting stock with ten votes per share. This makes it hard for after-school(prenominal) parties to take over or influence Google. Even as Googles up-to-the-minute actions regarding corporate governance to make stock split via a new class of stock, this would not change its top management already overtake voting power, since the power would decay very slowly while Googles shares get diluted.This structure has advantages, as they can avoid hostile takeovers and allow Google to concentrate on its long-term strategies rather than obsessed by tactical short-term moves. But it has much more negative effects, as there is more risk that the CEO make bad decisions. For example, Google stopped its China mainland operations, and this decision made in haste by Mr. Brin, has caused huge loss for Google and its investors. This flat reflects a lack of input from investors on Googles decision-making.In conclusion, although Google has focused on core strengths to make profits, the really challenge right now is to change the way that pushing ideas top-down and improve their current corporate governance condition, because whatever industries Google break into, good corporate governance is the fundamental insurance policy of keeping all its operations on the right track.Recommendation for Google InvestorsAlthough Google return potential problems in its management investment strategy, Googles business is rapidly evolving and intensely competitive. The overall optimistic attitude held by its current investors shows their confidence in Googles investment returns, but since Googles declining ROA and ROE as well as its shrinking margins reveals higher risk or probable late returns, investors should be wary when making investment, because Googles ongoing investment in new business, products and services is inherently risky, and may disrupt its ongoing business. Besides this, investors should be aware of its indwelling issues that may deteriorate their investment g iven its corporate governance situation.Exhibit 4Representative graphs of ratios during five yearsPart 1 Liquidity graphPart 2 Asset management graphPart 3 Debt management graphPart 4 Profitability graphCited References(n.d.). Retrieved from http//news.techeye.net/business/google-plans-enormous-real-estate-expansion(n.d.). Retrieved from http//www.aqueous-seo.co.uk/sem/seo/did-googles-profits-increase-despite-the-recession-or-because-of-it/99787(n.d.). 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