Should Alphabet Split Up Into Four?

Alphabet (Nasdaq: GOOG) recently announced its fourth quarter results, which relayed mixed signals. Alphabet’s Google has long been synonymous with search, but now its bets beyond search are paying off. However, there are also serious societal and ethical questions coming into focus that cast a shadow over the company and its peers, especially Facebook and Apple.

Alphabet’s Financials

Alphabet’s fourth quarter revenues grew 24% over the year to $32.3 billion, ahead of the Street’s forecast of $31.9 billion. EPS of $9.7 was, however, lower than the market’s forecast of $10 for the quarter.

Alphabet ended the year with revenues growing 23% to $110.9 billion. Profit declined 35% to $12.6 billion due to a tax bill for $9.9 billion and a $2.7 billion European Union antitrust fine, which is under appeal.

By segment, Q4 revenues from the Google segment grew 24% to $31.9 billion driven by a 24% growth in revenues from Google’s properties. Google properties revenues came in at $22.2 billion and revenues from its Members’ websites grew 13% to $5 billion. Other revenues grew 38% over the year to $4.7 billion. Google Other segment includes revenues from non-ad businesses such as the Play Store and infrastructure sales and hardware.

Revenues from Other Bets grew 56% to $409 million. Other Bets includes hardware sales from its popular Nest connected devices. Losses from the segment reduced marginally from $1.1 billion to $916 million.

Among operating metrics, aggregate paid clicks grew 43% over the year and 18% sequentially led by growth in mobile. Paid clicks on Google websites grew 48% over the year and paid clicks on members’ websites grew 13% over the year. Aggregate cost per click fell 15% over the year mainly because most of the growth in paid clicks came from mobile, which bring in less money than desktop clicks.

The company also revealed that Google Cloud, which includes Google Cloud Platform and G Suite, has become a $1 billion per quarter business.

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Sramana Mitra is the founder of One Million by One Million (1M/1M), a global virtual incubator that aims to help one million entrepreneurs ...

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Alpha Stockman 2 years ago Member's comment

Splitting up #Alphabet (aka #Google) could really benefit them by letting them focus on their core. The company truly has become too big to handle. $GOOGL

Alexa Graham 2 years ago Member's comment

I think breaking up #Alphabet would cause more problems for $GOOGL than it would solve.

Harry Goldstein 2 years ago Member's comment

It's an interesting idea to break Alphabet into 4 - YouTube, Google Search, Google Cloud, and Android. But I've never been a fan of spin-offs. Yes it lets each unit focus on their core strengths. But they also lose out on a lot of synergies that already or potentially exist.

Dan Richards 2 years ago Member's comment

I think you make a solid point. Plus there are many other areas that Google is exploring that don't quite fit into these 4. Google's R&D division dabbles in pretty much everything from Google glass to self-driving vehicles, voice recognition and more.

Carol Klein 2 years ago Member's comment

#Google is a Wall Street darling so I only expect it to go up and up. But yes, #YouTube is a problem. It has so much potential but they need to do much more to police and protect the site. And they are failing miserably at the job. YouTube truly has become too big to handle.

Henry L. Morgan 2 years ago Member's comment

You would think that with 1.5 BILLION monthy users that YouTube has, including many paying subscribers, that there don't utilize them to help crowd-police the site, similar to Wikipedia. That coupled with #Google's own expertise in technology, it is shocking to me that Google hasn't found a better way to keep YouTube safe.

James Goldstein 2 years ago Member's comment

Did #Alphabet make or lose money on it's 2017 divestitures? $GOOGL

Joe Black 2 years ago Member's comment

I'd be curious to know the answer to this as well.