Google's 11-Year Dream Run: From IPO to Alphabet
By Zacks Equity Research
August 20, 2015 3:12 PM
It's been 11 years since Google Inc. GOOGL
offered its stock to the public for the first time in a rather unusual
way. The company went public in a modified Dutch auction, managed by
Morgan Stanley MS and Credit Suisse CS.
The price? Only $85 per share.
On the very first day of trading, shares jumped 18% and never looked back. (And you can rest assured that its stock price will never reach those levels again, of course, without an aggressive stock split).
Those who invested in the early days have been rewarded generously. According to Fortune, “On a split-adjusted basis, Google’s stock price is up more than 1,500% from its offering price.”
In 2011, Google announced that the powerful trio of Eric Schmidt, Sergey Brin and Larry Page would no longer exist, with CEO Schmidt handing the reins over to Page, and Brin moving to other projects.
On the very first day of trading, shares jumped 18% and never looked back. (And you can rest assured that its stock price will never reach those levels again, of course, without an aggressive stock split).
Those who invested in the early days have been rewarded generously. According to Fortune, “On a split-adjusted basis, Google’s stock price is up more than 1,500% from its offering price.”
Google’s 11-Year Roller Coaster Ride: A Timeline
From
mobile search to Google Glass, Google has done some incredible things
over the years. Here’s a look at just a few of the major milestones in
its life after the IPO:
Prior
to its IPO on Aug 19, 2004, Wall Street was very skeptical about
Google. No one ever imagined how it would change the very future of
technology and could hardly fathom its earnings potential.
In
the first earnings report, Google triumphed. The company reported
adjusted earnings of 70 cents per share in the quarter on $503 million
in revenues (excluding traffic acquisition costs), beating the Wall
Street consensus by 25%. According to the Street, analysts had expected
56 cents a share on $456 million revenues.
In 2005, Google bought
Android, a company co-founded by Andy Rubin, and gave away the OS for
free to handset makers on the gamble that users would search using
Google. The gamble worked and Android now owns almost 85% of the
smartphone market, per IDC.
A
year later, Google released Finance, Calendar, Translate, Trends, Docs
and Sheets. The company purchased YouTube for $1.65 billion in stock, a
deal that would “combine one of the largest and fastest-growing
online-video entertainment communities with Google's expertise in
organizing information and creating new models for advertising on the
Internet."
From 2007 to 2009,
Google Maps Street View debuted in five U.S. cities; DoubleClick, now
its digital marketing arm, was acquired; and its first android phone
(G1) was launched. Google Chrome, Google Ventures, Google Chrome OS and
DoubleClick Ad exchange followed soon after. During this period, Google
Maps Navigation went live.
2010 saw the rollout of Google Fiber
and Google Instant; the AdMob buyout; and the fantastic concept of
self-driving cars slowly taking the shape of reality.In 2011, Google announced that the powerful trio of Eric Schmidt, Sergey Brin and Larry Page would no longer exist, with CEO Schmidt handing the reins over to Page, and Brin moving to other projects.
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Google+,
intended to be the online search giant’s answer to Twitter TWTR and
Facebook FB, was officially launched in Sep 2011. Though the service has
over 540 million users (as of Oct 2013, the last time the company
released official statistics for it), consumers have never really taken
much fancy to it.
Google purchased Motorola Mobility for $12.5
billion, its biggest acquisition ever. With this, the company made its
way into the handset game apart from strengthening the patent portfolio.
In
2012, Google unveiled Project Glass (which later became Google Glass),
marking its official move into wearable technology. Google Glass
garnered mix reactions, given its limited sales and high price tag
($1,500), despite a partnership with fashion designer, Diane von
Furstenberg.
Along with this, Google Drive was launched and Google released Maps for Apple AAPL.In early 2014, Google sold Motorola Mobility to Lenovo for $2.91 billion, but retained the majority of its patents. This gave merit to the initial theory that the company wanted Motorola Mobility's patents all along.
Google
moved into the home space later in 2014, with the Nest buyout in a cash
transaction worth $3.2 billion. Nest manufactures Nest Learning
Thermostat and Nest Protect, a smart smoke alarm. The company also
revealed its intention to enter the "Internet of Things" market.
Next came the glucose-monitoring contact lenses and Google's own self-driving car.
Present- 2015
In
a move that both surprised and thrilled Wall Street, Google announced a
major corporate restructuring that promises more clarity about its core
business.
The exact
mechanism it used sounds confusing: the formation of a new holding
company called Alphabet whose wholly owned direct subsidiary along with a
wholly-owned indirect subsidiary of Google merges into Google, which is
itself a subsidiary of Alphabet. All shares of Google will
automatically be concerted to an equal number of Alphabet shares and
retain the same rights. Ticker symbols won’t change either.
The complicated structure seems designed to ensure that Page and Brin remain in control of the entire business as always.
What Actually Changed
Google
Inc. now comprises the elements of the core business only, i.e. search,
ads, YouTube, Android, Chrome and infrastructure. So it’s not
surprising that Sundar Pichai, who headed Android, search, Google Drive,
Chrome OS, Maps, apps, ads and more (most of the business, in fact,
except YouTube) received the title to go with the job. He is the new CEO
of Google and Ruth Porat the CFO.
The rest of the business that
comprises X Labs (moonshots that led to Glass, self-diving cars,
delivery drones, etc), Nest (smart thermostats and related products),
Google Fiber (for high speed Internet access), robots, Calico (research
on longevity), Life Sciences (contact lenses to test diabetes from tear
drops, etc.), Google Capital and Google Ventures (investments in
startups) and other things will be overseen by Alphabet management (Page
as CEO, Brin as President, Schmidt as Executive Chairman and Porat as
CFO).Looking Ahead
Google has been a huge winner for investors — but not the biggest!
According
to analysts at USA TODAY, there are 13 stocks in the Standard &
Poor's 500 index that have topped Google since its IPO.
This
includes energy drink seller Monster Beverage MNST, biotech company
Regeneron Pharmaceuticals REGN and online retailer Priceline PCLN. Apple
has also outperformed Google.
However,
according to USA TODAY, there are some real numbers behind Google
stock's growth. The company's revenues have soared a whopping 2,083%
since 2004 to $69.6 billion while net income skyrocketed 3,701% to $15.2
billion.
It's been almost a dream run for the search giant, but the world is moving to several other things.
Facebook
has been able to collect much more specific data that interests
advertisers. It also happens to own Instagram, which is swiftly catching
on with the younger mobile phone users who consider search as a
commodity. Google’s social networking plans haven’t gone off well and
the company recently announced its decision to strip Google+ of some key
elements. Google does have Twitter integration and local searches going
on, so all is probably not lost.
Google
remains focused on just about everything, or maybe we should say on the
future of everything and in that respect, not much has changed. The
Zacks Rank #2 (Buy) stock is still proud to call itself unconventional.
So no one really knows what the next 11 years will bring!
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