Press-Republican

FYI...

January 20, 2014

Google outspends top five rivals combined in move beyond Web ads

SAN FRANCISCO — Google, drawing from its $56.5 billion cash pool, is spending more money than five of its biggest U.S. competitors combined to buy into new markets as growth in Web advertising slows.

Including this week's announced deal to buy Nest Labs for $3.2 billion in cash, Google has spent more than $17 billion in the past two years to purchase hardware, software and advertising-technology companies, according to data compiled by Bloomberg. Apple, Microsoft, Facebook, Amazon.com and Yahoo have spent less than $13 billion in total to buy companies in the same period, based on deals with disclosed prices.

The spending blitz, which is mostly in cash instead of stock, underlines how Google is paying top dollar to expand its reach and acquire the talent necessary to push deeper into areas such as smartphones and Web-enabled gadgets. While Google has dominated Internet search, a business that generates billions of ad dollars each quarter, the company is seeking new revenue from other sources and turning to its cash hoard to provide an advantage.

"They're looking at what's next," Sameet Sinha, an analyst for B. Riley & Co. in San Francisco, said in an interview. "They're saying we're going to keep our cash for acquisitions."

Leslie Miller, a spokeswoman for Mountain View, Calif.- based Google, declined to comment.

Google's cash and equivalents jumped 24 percent from a year earlier in the third quarter to $56.5 billion, while net revenue increased by 5.2 percent to $11.9 billion. Google gets 84 percent of sales from Internet ads, even after diversifying into hardware and other areas.

Revenue growth slowed last year and is expected to do so again in 2014 based on analysts' estimates as more online activity shifts from personal computers to smartphones, tablets and other connected devices. That hurts Google's sales because mobile ads typically cost less and because search is less prominent on other devices. By 2017, PCs will account for 13 percent of connected-device shipments worldwide, down from 29 percent in 2012, according to researcher IDC. Tablets will make up 17 percent by 2017, and smartphones will account for 71 percent, IDC said.

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