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Google 2012 2Q Financial Analysis

|Includes: Alphabet Inc. (GOOG)

Google 2012 2Q results are good. 2012 2Q revenue shows good increase to 12,2 bn.$. or +35% compared to 2011 2Q 9,0 bn.$. Main driver of such jump at 2Q was that from 2Q Motorola results are include into Google financials. Net Income before depreciation has increased to 3,5 bn.$ which is +17% increase compared to 2011 Q2. Earnings are increasing but a lot slower then companies revenue, this is something to note. Possibly this is because present larger expenses will generate larger revenues in future as this is not a retailer were present revenue has present expenses. In Google case (similar to Facebook) present expenses/investments lead to revenue in future.

After acquisition of Motorola Google income became a bit more diversified. Although Motolola is just ~10% of Google income, but its a start. Income from Google website and google network has increased by ~20% compared to previous year. Main companies revenue source 2/3 is still from Google.com website.

According to http://www.netmarketshare.com Google share in search engine market stays stable around 80% so Google continues to be #1 without any notable competition. And in Mobile devices Google share is even larger ~90%.

Company is competing in its competitors fields: 1) Google+ competing with Facebook; 2) Chrome with Microsoft Explorer and 3) Android mobile + Motorola acquisition competing with Apple IPhone/IPad. As Mobile device market is almost dubbing each year this is were the main battle will be fought.

At mobile operating system Google Android has increased its share a bit from 19% to 20%, but Apple (iOS) stays on top with its market share increased from 60% to 65%. So Google at the moment is behind Apple and the gap is even widening.

Company is gaining ground in new segments and is firmly holding its main search market. In general companies results are positive.

Balance structure continues to be very strong even after Motorola integration who had quite a lot of debts. Equity level has decreased only to 75% which is a very good ratio. ROE has drooped to 17% and should be monitored closely in the future. Liquidity level 3,8 very good due to large cash and equivalent reserves which drooped a bit at Q2 from 49 bn.$ to 43 bn.$ due to acquisition of Motorola, but still this is equals of 1/2 of total companies asset. Motorola acquisition is visible in Fixed asset increase from 20 bn.$ to 32 bn.$. In general companies balance structure remains strong.

Share value:

Equity / share 64,7 bn.$ 0,327 bn. 198 $/sh.
Market value 673$ +475£ 11,7 years
Year Net income before Depreciation 13,3 bn.$ +40,7 $/sh. 6,0%

Companies share basic value is ~198$ (Δ+4,2% from 190$ compared with Q1). Current market price is ~673$ (Δ+11,1% compared to past analysis time 606$) shows that market is paying 475$ more or 11,7 years (10,6 years) of Net income before Depreciation earnings, which quit a lot. Due to high share market value increase in past quarter its price got even more over evaluated. Share profitability (Share market price/Net income before Depreciation) is 6,0% (6,5%) which is also low. In general share is over evaluated and got even more over evaluated since 1Q analysis.

Analysis source: Google Second Quarter 2012 Financial Results

Previous analysis: Google 2012 1Q financial analysis