Google Inc financial performance

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Introduction

Rapid advances in technology have greatly influenced the operations of the internet providers in the search industry. Such organizations have witnessed tremendous changes in the recent past and have therefore adopted new operational strategies to not only guarantee their survival in the market but also improve their profitability and subsequent performance. To begin with, the management strategies so far adopted by the various organizations in this industry are based on innovations and technological advancements as exemplified by Google Inc. Since its inception as BackRub by two computer science students from Stanford University, Google search engine has maneuvered through a highly competitive market to become the best search engine in the world (Gamble, 2008). Initially, Sergey Brin and Larry Page developed the BackRub search engine in 1996 which later expanded and captured the world market. BackRub later transformed to Google Inc. in 1998 following its acquisition by an investor who paid up $100000 for the search engine. Since then, Google has undergone comprehensive changes to dominate the search industry (Porter, 1998). It has a sound financial background including revenue base and net income that has grown courtesy of strategic management approaches adopted by the firm including acquisition and technological innovations.

Google Inc has displayed a commendable financial performance in the search industry since its inception. To begin with, Google Inc. recorded a massive revenue growth in 2007 to about $16.5 billion hence increasing its competitive potential against Microsoft and Yahoo companies. It therefore overtook Yahoo Co. which had been in the business many years before Google Inc. Yahoo Inc had a revenue base of about $6.9billion in the same period. However, Microsoft had the strongest revenue base of slightly above $50billion in the year 2007 (Gamble, 2008). It is worth mentioning that Microsoft Live demonstrated poor performance in the online business as it recorded losses in 2008. Its $17.1 billion net income accrued from the Microsoft office and Window vista alone. The two business sectors also contributed to almost one third of Microsoft’s revenues of $60.4billion in 2008. The figures therefore demonstrate Google’s competitive ability in the light of the two aforementioned rival companies given the fact that Microsoft indulges in a variety of businesses other than internet provision. The aforementioned revenue base was generated by the company as a result of the loyalty of internet users that Google Inc. had ever since enjoyed in the market thereby dictating the huge market share. In 2008, Google Inc took leadership in offering mobile and internet advertisements by controlling over 63% of the market share (Gamble, 2008).

Google Inc had demonstrated a steady growth since its inception and could not be dislodged from the leadership position in the internet advertisements within the industry by either Yahoo or Microsoft Live. It out-competed all the business rivals in the internet industry including AOL, Ask, Yahoo, and Microsoft among other firms in the industry by controlling more than 40% of the market share (Gamble, 2008). Moreover, the company adopted a strategy of acquiring other business ventures in an attempt to increase its revenue base, net cash as well as earnings since the 2004 IPO. Such approaches further stabilized Google Inc against its close competitors in the market. Besides, the venturing into cloud computing technology is believed to enhance the company’s growth to $95 billion by 2013 (Gamble, 2008).

Google inc. recorded commendable profits in the online business in 2008 by recording a profit of about $4.2billion in the aforementioned period up from %3.08billion in the previous year compared to Microsoft’s net income of $14.0billion in the same year. This income was generated from other business sectors notably Microsoft office 2007 as well as Windows vista and not online business as expected. The company’s online business however recorded net sales of about $3.2billion in 2008. In the process, Microsoft suffered a $1.2billion operating loss in the year in review (Gamble, 2008). Yahoo Inc. on the other hand recorded a meager $6.6 million net income in the same period thereby lagging behind the two companies in the online business. The above statistics on Google’s profitability demonstrates a positive financial performance of the firm during the year in review.

Google also had quite a commendable quantity of assets compared to its liabilities thereby demonstrating its financial worth compared to the other two rival companies. For instance, in 2007, Google had asset value worth about $25 billion against meager total liabilities of approximately $2.6billion in the same period. The assets recorded in the aforementioned time period increased from $18.5billion in the previous year. This is more than $6billion increase in one year which is a commendable performance by the firm. However, the liabilities increased from approximately $1.3billion in 2006 to $2.6billion in subsequent year. Yahoo on the other hand had total assets of about $12billion against long-term liabilities of approximately $0.4billion compared to Microsoft’s total assets value of about $63billion in the same period. It is noteworthy that Yahoo Company had recorded a slight increase of $0.5billion in the total assets which is far below the records shown by Google Inc. However, Yahoo’s record of reducing long-term liabilities from $0.8billion to $0.4billion is encouraging. Microsoft on the other hand had a decrease in the value of total assets from $69billion in the previous year of 2006 thereby demonstrating its sluggish performance compared to the two aforementioned business rivals.

Besides, Google recorded an increase in its stockholder equity from $17billion in 2006 to approximately 22.6billion in the subsequent year. The assets acquisition is growing against the reduction in liabilities recorded by the firm. This therefore meant that the company is showing growth through acquisition of assets during its period of operation. Microsoft on the other hand had a tremendous decrease in its stockholder equity from approximately $40billion in 2006 to about $31billion in 2007. Yahoo Inc however recorded slight increase in the stockholder equity from about $9.2billion in 2006 to approximately $9.5bilion in the subsequent year (Gamble, 2008). Generally, Google Inc demonstrated a commendable performance given the statistics on the stockholder equity during the aforementioned time period compared to the two close rivals in the search industry (Warren, Reeve, & Duchac, 2008).

Google Inc. has also shown positive performance through the constant increase in its net income per share between 2004 and 2007. Notably, the net income per share increased from $0.77 in 2003 to a staggering value of $13.53 in 2007. This is reflects a total increase in the net income of the firm from a meager $6.9million in 2003 to the $4.2billion in 2007. This is more than sixty nine thousand percent increase. It is without doubt that the company has recorded the best growth in the net income in the search industry so far (Warren, Reeve, & Duchac, 2008). Yahoo Company on the other hand recorded a slight increase in the net income growth from $0.24billion in 2003 to $0.66billion in 2007 thereby posting a growth of $0.42billion in four years. Microsoft Live recorded an increase in net income too from $8.2billion in 2003 to $17.7billion in 2007. This is about $9.5billion increase which translates to 54% increase. Once again Google tops the two rival companies in the annual increase ion net income as shown in the above statistics.

Generally, the balance sheet of Google Inc has shown commendable improvement in 2007 compared to the previous year in all the aspects of financial performance including changes in current and fixed assets, short and long-term liabilities, stockholder equity, as well as net income among other financial facets (Warren, Reeve, & Duchac, 2008). The company has out-competed its close rivals notably Microsoft Live as well as Yahoo Inc. in the growth prospectus as shown in the financial statements of the aforementioned organizations. The sound financial performance of the firm is attributed to the suitable management strategies adopted by the firm during the period of study.

Conclusion

Search industry has witnessed rapid changes in the recent past to acquire a new outlook that is not only appealing but also admirable. At the outset, these changes may be attributed to a variety of factors including advances in technology currently witnessed. These changes impact on the performance of an organization. Since its official commencement of operations under the brand name of Google in 1998 Google Inc, has demonstrated commendable performance in the highly changing and competitive market to become the best organization in provision of online services. By analyzing all the aspects of financial growth, it s worth noting that Google Inc. has shown tremendous changes in its financial worth compared to any other business in the search industry. For instance, Google Inc. recorded $6.9million in net income in 2003 and four years down the line, its net income grew to approximately $4.2 billion. Such financial performance is hard to achieve in the current world business market characterized by a lot of uncertainties. The company’s performance is attributed to the faith its customers have grown in its services. Moreover, the firm’s expansion strategies including acquisition of other business ventures too contribute to its heightened performance in the search industry. As mentioned earlier, Google’s financial performance is far beyond its closest rivals notably Microsoft and Yahoo Companies.

Reference List:

Gamble, J. (2008). Google’s strategy in 2008. John E. Gamble.

Porter, M. (1998). Competitive advantage: creating and sustaining superior performance: with a

new introduction. London: Simon and Schuster.

Warren, C., Reeve, J. & Duchac, J. (2008). Corporate Financial Accounting. 10th Ed. Florence:

Cengage Learning.