Google (NASDAQ:GOOG) announced the launch of its new investment Calico, a health company focused on diseases related to ageing. According to reports, Google is not just looking at tackling diseases related to ageing, but rather, trying to prolong human life, or better still make life better and enjoyable for those who live long.
The idea of prolonging human life is not new to mankind, this is an area that has been under study for such a long time, albeit without a major success. However, with rapid advances in technology, and R&D, Google, which has so often pulled a shocker time and again, on various innovations, may yet prove to possess the Midas touch in this venture.
According to reports, Apple's (NASDAQ:AAPL) Chairman of the board Art Lavinson will head Calico, but will still maintain his position as Chairman of Apple and Genentech. When asked about Lavinson's new position, Apple CEO Tim Cook said, "For too many of our friends and family, life has been cut short or the quality of their life is too often lacking, Art is one of the crazy ones who thinks it doesn't have to be this way."
Meanwhile, in an interview with Time Tech, with regard to the venture, Google CEO Larry Page said, "Are people really focused on the right things?"
One of the things I thought was amazing is that if you solve cancer, you'd add about three years to people's average life expectancy. We think of solving cancer as this huge thing that'll totally change the world. But when you really take a step back and look at it, yeah, there are many, many tragic cases of cancer, and it's very, very sad, but in the aggregate, it's not as big an advance as you might think."
Page believes that the opportunity at hand is indeed bigger than that of finding the cure for cancer. Therefore, if that's the case, just how important could this be for the search engine giant?
Everyone wants to live longer, well nearly ...
For starters if indeed Google is to pull this out, then it won't be easy, and it's going to take time. Page gave a rough 10-20 years forecast, but it could yet be pretty sooner than that.
"It takes 10 or 20 years to go from an idea to something being real. Health care is certainly one of those areas. We should shoot for the things that are really, really important, so 10 or 20 years from now we have those things done."
But this is of course an opportunity that would not only provide diversification for Google, but also an avenue to a continuous stream of income. Google has been a leader in innovative products over the recent past including the launch of a self-driving car, a new look priority inbox and Google glasses, among others. No one ventures into a certain business without considering the risks involved. Some of Google's innovative products have perhaps ended up as flops, but there are some too that have been on top.
Google is launching Calico as a separate company, which means it will be treated pretty much like a different entity by the search engine giant. And while this still attracts significant risk, Google CEO did recently reveal the manner in which, he prefers the company to undertake investments.
"I'm not proposing that we spend all of our money on those kinds of speculative things," he said during an interview at the Googleplex, the company's Mountain View, headquarters in California. "But we should be spending a commensurate amount with what normal types of companies spend on research and development and spend it on things that are a little more long term and a little more ambitious than people normally would. More like moon shots."
Well the company's venture in trying to cheat death is definitely long-term, and of course ambitious, and no wonder he says, "Google is not a normal company".
Nonetheless, I believe that Google has the necessary fundamentals to pursue this venture without major hick-ups on its performance. The company has $54 billion in cash, based on the most recent quarter results, against a debt of just $8 billion. Its operating margin of about 24% on a trailing-twelve month revenue of about $56 billion means that the company should report about $13 billion in operating income for the current year. This offers enough flexibility for the company to continue investing in R&D, as it continues to pursue various challenging ventures like Calico.
The benefits associated with this venture are invaluable, and the company could also end up enjoying a monopolistic status, in the event it succeeded.
Is this venture worth the gamble? Well, I would say, for a company like Google, it is worth every chance. This is an opportunity that bodes well with the company's innovative campaigns as witnessed over the recent past.
Furthermore, just as witnessed with Tesla (NASDAQ:TSLA), when these ventures begin to pay-off, they tend to pay-up big-time.
Google controls the search engine market, and no other company has come close to being a close challenger leave-alone threatening to overtake it. This means that Google can easily venture into other markets without having to worry much about its base market. This is why it has been so successful with its freeware-Android platform; and this investment in health has every chance of becoming a healthy one too.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.