Sunday 23 November 2014

Google chief drops hints at plan for hardware market

Peter Flanagan New Technology Correspondent

Published 24/01/2013 | 05:00

LARRY Page does not sound healthy. When he speaks on conferences calls, his voice sounds hoarse, metallic, and generally sick.

That is not to suggest for one minute, though, that Google's chief executive is in anything but the rudest of health, much like his company.

Investors in Google received some welcome good news from the company on Tuesday night. Google, after a tough third quarter, said revenue for the final three months of 2012 topped $14.4bn (€10.8bn), while earnings per share climbed to $10.65.

Those numbers, which were well ahead of market forecasts, cheered traders and saw Google's share price climb nearly 6pc when it opened yesterday.

While the garden is certainly rosy, the market remains volatile, however, and Google has several challenges to negotiate.

The biggest obstacle on the horizon for the company will be how it handles the transition from desktop computing to mobiles and tablets.

The size of these devices works against advertising, which accounts for about 89pc of Google's revenues.

In short, you can't get many ads on such a small screen. This has caused problems for both Facebook and Google, but yesterday Google finally appeared to be getting on top of the problem.

Cost per click (CPC), essentially how often a user clicks on an advertisement, decreased 6pc year-on-year, but was a much gentler decline than the 15pc fall that had been seen in the previous quarter.

Mobile

That is not to say the mobile side of the business is not without its problems. The rate of decline may have slowed, but CPC is still declining.

The stabilisation of CPC was offset though by a decline in "paid clicks", or sponsored advertising. The growth rate in that side of the business fell from 33pc to 24pc.

While chief business officer Nikesh Arora said much of this decline was due to tougher standards being imposed by Google and a reduction in the number of ads on certain pages, the bottom line is this figure was down.

Away from the pure search business, the company is also experiencing problems with its move into hardware.

As well as the likes of Gmail and Search, Google now has its "Nexus" suite of smartphones and tablets, while it also makes smartphones, thanks to its acquisition of Motorola two years ago.

The company does not break down numbers around its Android software system but revenues at Motorola declined sharply quarter-on-quarter to about $1.5bn (€1.1bn).

Android

That does not reflect a decline in the use of Android phones – the operating system has overtaken Apple's iOS to be the most popular operating system for smartphones in the world – but it does reflect the problems it is facing as it moves into the hardware sector.

Google's move into hardware now appears to be being replicated by Microsoft, which is moving beyond its Windows operating system and could be buying into Dell.

The idea of the software company taking greater control of the physical device that it's run on is a clear sign of Apple's influence on the business.

The success of Apple's fully integrated laptops and phones is fast becoming the holy grail for tech companies.

Holy grail

There may be another holy grail coming though. On the conference call, Larry Page talked about progress in the mobile market and how we are all connected.

Nothing new in that. But then he spoke about how users shouldn't have to worry about running out of battery, or smashing their device every time they drop it.

So is Google working on an unbreakable smartphone with a massive battery life? He wasn't saying, but if they come up with it, it will certainly be a winner.

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