
Alphabet Announces Third Quarter 2016 Results - maverick_iceman
https://abc.xyz/investor/news/earnings/2016/Q3_alphabet_earnings/
======
ariwilson
It's interesting to note that Microsoft's revenue, operating income, and net
income are all now lower than Google's ([https://www.microsoft.com/en-
us/Investor/earnings/FY-2017-Q1...](https://www.microsoft.com/en-
us/Investor/earnings/FY-2017-Q1/press-release-webcast)).

~~~
pscsbs
As someone that is very naive when it comes to earnings reports, do you mind
explaining why this is interesting?

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CydeWeys
Microsoft used to be the 800 pound gorilla in the tech space. No one even came
close to it in size. Now Alphabet (and presumably Apple, though verify the
numbers) are bigger than it by every conceivable relevant metric.

~~~
lambdasquirrel
Adding to what others said, slashdot.org was the water-cooler news site back
then and the icon for Microsoft was a borgified Bill Gates.

Microsoft did everything it could to destroy openness in the software world.
They wrote that the GPL was a virus, hired prominent heads of open source
projects like Miguel de Icaza and the name of the Gentoo guy who I forget, and
nothing really became of those projects afterwards. And of course there was
Netscape and IE up through IE8, IE6 being the most infamous.

Yeah... Microsoft was the bad guy on the block.

(edit: misspelled Gentoo)

~~~
flukus
It was depressing seeing how MS treated OSS on their own ecosystem (.net). For
every good project MS would release there own inferior clone and the whole
ecosystem was left worse off.

~~~
lambdasquirrel
Microsoft ate their own platform is what it was and then people stopped
developing for them. That was one really big reason why the web became a
thing. Everything used to run on the desktop. Microsoft quashed that, and then
Google came along, made search, maps and mail work. Firefox and Opera (and
yes, Safari) circumvented IE; Google pretty much funded Mozilla for Firefox
until it came out with Chrome, basing off of Apple's webkit.

It's remarkable that those of us in the Linux world spent so much time trying
to unseat Microsoft from the desktop, and what did it in the end was Google
and Apple simply working around the Microsoft/Intel (i.e. "Wintel") monopoly.

~~~
hga
But the way they quashed it is instructive: every few years they'd come up
with some New, Improved way of doing it, and depreciating the old. People got
sick and tired of learning the latest arcane, hard to program, generally with
some degree of buggyness, poorly documented approach, only to have that become
obsolete, and put what they'd created in jeopardy.

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AndrewKemendo
Alphabet Revenues: $22,451

Google segment Revenues: $22,254

So everything else Alphabet is a cost center. Even the ROI for the $197M in
revenues from Other Bets is offset by Other Bets losses.

~~~
ryanobjc
By design, right? The other bets are exactly that - bets.

The point of Alphabet is to surface visibility as to how much these bets cost.
Not to showcase their profitability.

~~~
ChuckMcM
I don't think so. As I understand it the "other bets" are supposed to be the
things that become big businesses and can shore of the shrinking margins on
search advertising and the market share loss to Bing.

~~~
ariwilson
Shrinking margins don't seem like a problem yet. Operating margin went up YoY
from 25% -> 26% and revenue was up 20%. For the record, here's the discussion
we had last year about search advertising margin:
[https://news.ycombinator.com/item?id=10796448](https://news.ycombinator.com/item?id=10796448).
Odds for your prediction of widespread Google layoffs in 2016 are looking
worse by the day.

And market share loss to _Bing_? Don't make me laugh. Bing revenues are up 9%
YoY ([https://www.microsoft.com/en-
us/Investor/earnings/FY-2017-Q1...](https://www.microsoft.com/en-
us/Investor/earnings/FY-2017-Q1/press-release-webcast)) while Google website
income is up 23% YoY (note we don't have breakdown into search but conference
call says this was primarily generated by mobile search & YouTube).

~~~
ChuckMcM
I agree widespread layoffs are probably not in the cards unless the next
quarter really tanks. I don't count cutting back projects like Google Fiber as
"widespread".

Bing's growth and CPC improvement in the Americas comes at the cost of the
only other search engine.

I wouldn't get too excited about the 20% revenue growth, it didn't quite match
the 21% total growth of the segment[1].

[1] [https://www.iab.com/news/first-quarter-u-s-internet-ad-
reven...](https://www.iab.com/news/first-quarter-u-s-internet-ad-revenues-hit-
record-setting-high-nearly-16-billion-according-iab/)

~~~
jholman
Do you have any evidence that Google is losing market share? The latest
reports I could find (from Feb 2016) showed that Bing's incredibly small
increase in market share in the Americas is actually less than Google's
growth, and at the expense of Yahoo and Ask.

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ChuckMcM
[https://www.searchenginejournal.com/bings-share-search-
marke...](https://www.searchenginejournal.com/bings-share-search-market-
growing-faster-googles/164425/) sees it a bit differently.

~~~
ariwilson
0.2% change in one month does not make a trend.

Desktop market share is also increasingly less relevant to the search engine
game.

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d4l3k

      Stock Repurchase
    
      In October 2016, the board of directors of Alphabet authorized the company to repurchase up to $7,019,340,976.83 of its Class C capital stock. The repurchase is expected to be executed from time to time, subject to general business and market conditions and other investment opportunities, through open market purchases or privately negotiated transactions, including through Rule 10b5-1 plans.
    

Is it typical for Google to have stock repurchases? I haven't heard of them
doing that before.

~~~
ultimoo
Can someone shed light on why companies do a stock repurchase?

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hencq
Basically a way to reward shareholders. They're more or less equivalent to
dividend, but considered more tax efficient, because capital gains tax is
lower than tax on dividends.

~~~
sokoloff
Long term capital gains and qualified dividends (which is most of them) are
generally taxed at identical rates. Capital gains have a choice of timing
advantage over dividends. (You can choose to take them now, or next year if
you don't want the income exposure this year.)

The holding period required for long-term treatment is more than enough to
qualify for the qualified dividend treatment.

~~~
Retric
This is misleading. A dividend is a taxable event, with stock buybacks people
who hold the stock can defer taxes indefinitely.

In theory, a hypothetical company with a 1$ dividend every year would see it's
stock price rise and fall by 1$ through this cycle. A buyback would see a
continuous increase in price.

~~~
sokoloff
It is misleading? How could I have made that not (or less) the case?

I specifically called out that choice of timing in my second sentence and
explained it further in my third.

~~~
Retric
There is a tax advantage, it is due do the zero tax rate on assets before they
where sold. Sure, if you happened to want to cash out exactly the same amount
or more than the dividend then it's the same. But that's not the general case.

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secfirstmd
10,000 employees added in a year? Wow, that's alot!

~~~
mrb
As it was said internally: "we are hiring '1 Facebook' every year."

~~~
rasz_pl
SUN was like that too, they averaged one campus per month in hires.

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samfisher83
Would love to see a desktop vs mobile break down. Its phenomenal that most of
their paid clicks are on their site which mean higher margins.

~~~
monkmartinez
The first link after a search is often a text ad disguised as link for the
exact same link just below. Sometimes, I purposefully click on the non-ad
link... I call it "living dangerously!"

~~~
chirau
I never click on a link that is preceeded by a green 'ad' box, unless I am
hunting for a deal on the site i specified in the search box. Like,"99c
GoDaddy domains promotion".

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blahi
So you never click on an ad, unless you are shopping. Cool.

~~~
chirau
Ad is a vast term. You are generalizing. Remember, a friend of mine posting a
link to their product or blog is an ad.

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shmerl
Do they have details about Google Fiber?

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neom
Their CFO said that "Other Bets" generated revenue of $197 million, primarily
from Nest, Fiber. Not much mention of cloud except that it grew with "Other
Revenue".

~~~
shmerl
But was Fiber profitable? What were the expenses? I.e. why would they suddenly
"pause" it now?

~~~
nyc640
Someone asked about it in the earnings call if you're curious [1]. I think
it's been widely speculated about before but it seems like they're exploring
new technologies (e.g. Wireless) that are more cost-effective [2].

[1] [https://abc.xyz/investor/](https://abc.xyz/investor/)

[2] [https://www.technologyreview.com/s/602730/google-is-
cutting-...](https://www.technologyreview.com/s/602730/google-is-cutting-the-
cord-on-its-fiber-rollout/amp/?client=safari)

~~~
shmerl
_> I think it's been widely speculated about before but it seems like they're
exploring new technologies (e.g. Wireless) that are more cost-effective_

And also way lower quality and limited potential in comparison with fiber. I'm
basically wondering is it simply usual move for more profits, or fiber itself
isn't profitable?

~~~
xbmcuser
I think it has more to do with the road blocks being put in place by current
isp's. Fighting and working around those increase fiber installation costs and
makes it harder for them to be profitable. They still will probably expand
google fiber to places that already have community fiber installations.

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nickjarboe
Not a big fan of Class C the stock buyback. As a holder of Class A and Class C
shares (from the earlier split), I thought I should sell Class C, that has no
votes and buy Class A which get to vote. Mostly out of laziness, I didn't
switch up to Class A, but if I can't vote with my Class A shares to buy back
only Class A and not Class C, then I don't know which I would buy now. Seems
like a backdoor transfer to Google employees who get Class C shares, but I
knew what I was getting into with Larry and Sergey controlling the company
with their B shares.

~~~
oh_sigh
Out of curiosity, why do you care if you can vote with your shares on a
company this size? Unobtainium shares(class B) already control 64% of the
votes, so the odds of your vote mattering is essentially 0.

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gbog
Side note: did anyone else notice how choosing "Alphabet" as the name of this
entity, while apparently neutral and universal, is actually quite heavily
loaded? Who in the world is not using "alphabet", i.e. an alphabetic language?
China. So this "Alphabet" name just excludes a quater of humanity. Is it by
purpose?

~~~
labster
Plenty of people who use abugidas use Alphabet products too. But rest assured
that people who use computers in China use pinyin input, and that is
alphabetic.

~~~
gbog
Yes but no. Almost all writing systems are alphabetic, but the Chinese
characters. It makes them very special and different. And China has its
culture rooted in its characters. So using "alphabet" as the name of an entity
with an universal reach just means the guys behind either do it by purpose or
have a 25% sized blind spot.

