May 26, 2019
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Alphabet misses on Q1 revenues of $36.3B; EPS of $9.50 weighed down by the $1.7B European fine

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After warning investors that it would be taking a $1.7 billion (€1.5 billion) charge this quarter due to a fine from the European Commission over anticompetitive advertising practices, today Google parent Alphabet reported its quarterly earnings for Q1. Overall it’s a tough quarter for the company that speaks to struggles with its growth. Alphabet reported revenues of $36.3 billion, with diluted earnings per share of $9.50.

Analysts were expecting Alphabet to report GAAP earnings of $10.17 per share, with adjusted EPS expected to be $13.10, on overall revenues of $37.34, according to estimates from Yahoo Finance.

The company’s stock is down by 7.35 percent in after-hours trading at the moment.

Google’s canned statement in the earnings release struck a positive tone: “We delivered robust growth led by mobile search, YouTube, and Cloud with Alphabet revenues of $36.3 billion, up 17% versus last year, or 19% on a constant currency basis,” said Ruth Porat, Chief Financial Officer of Alphabet and Google, in a statement. “We remain focused on, and excited by, the significant growth opportunities across our businesses.”

But the reality is that, as the advertising market matures and Google faces increasing competition, while newer areas of business have yet to mature enough to show if they will be profitable efforts for Google, which includes not just its moonshot “other bets” but even its extensive efforts in more established businesses like hardware and cloud services.

The latter represented the company’s biggest expenses in R&D in the quarter, Porat said, while Sundar Pichai, Google’s CEO, had to get defensive on its hardware investments.

He described the Google Home smart speaker as a “market leader” and that “our commitment is very strong” to its hardware business.

“We really see this as incredibly important to drive the future of computing forward, and to make sure our services are presented to users, in the way that we intended them to be.

“Computing will continue to evolve beyond phones, and so we want to make sure we are inthere are we’re very committed to it for the long term.”

Google had said that the EU fine is not tax deductible and will result in a direct reduction of its GAAP operating income, GAAP net income and GAAP EPS, so the EPS weight was not a big surprise.

But the sales revenue, based primarily on advertising, was also not great: the figure grew 17 percent, compared to a year ago, when it was growing at 26 percent. (Both figures are on straight numbers; on a constant currency basis they are only slightly better for this latest quarter, at 19 percent.)

For some context, in the previous quarter, Alphabet reported that revenues were up 22 percent at $39.3 billion, with an EPS of $12.77. Its stock still dropped after hours

Advertising represented the bulk of Google’s revenues at $30.7 billion, while its “other bets” — projects in newer technologies and moonshots like its Waymo self-driving unit and the Project Loon internet balloons — is still a massively loss-making effort, pulling in an operating loss of $868 million on revenues of only $170 million.

More to come.


Internet connectivity projects unite as Alphabet spinout Loon grabs $125M from SoftBank’s HAPSMobile

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Two futuristic projects are coming together to help increase global internet access after Loon, the Google spinout that uses a collection of floating balloons to bring connectivity to remote areas, announced it has raised money from a SoftBank initiative.

HAPSMobile, a SoftBank project that is also focused on increasing global connectivity, is investing $125 million into Loon, according to an announcement from SoftBank made this morning. The agreement includes an option for Loon to make a reciprocal $125 million investment in HAPSMobile and it includes co-operation plans, details of which are below.

HAPSMobile is a one-year-old joint venture between SoftBank and U.S. company AeroVironment . The company has developed a solar-powered drone that’s designed to deliver 5G connectivity in the same way Facebook has tried in the past. The social network canceled its Aquila drone last year, although it is reported to have teamed up with Airbus for new trials in Australia.

Where Facebook has stumbled, HAPSMobile has made promising progress. The company said that its HAWK 30 drone — pictured below in an impression — has completed its initial development and the first trials are reportedly set to begin this year.

Loon, meanwhile, was one of the first projects to go after the idea of air-based connectivity with a launch in 2013. The business was spun out of X, the ‘moonshot’ division of Alphabet, last year and, though it is still a work in progress, it has certainly developed from an initial crazy idea conceived within Google.

Loon played a role in connecting those affected by flooding in Peru in 2017 and it assisted those devastated by Hurricane Maria in Puerto Rico last year. Loon claims its balloons have flown more than 30 million kms and provided internet access for “hundreds of thousands” of people across the world.

In addition to the capital investment, the two companies have announced a set of initiatives that will help them leverage their collective work and technology.

For starters, they say they will make their crafts/balloons open to use for the other — so HAPSMobile can tap Loon balloons for connectivity and vice-versa — while, connected to that, they will jointly develop a communication payload across both services. They also plan to develop a common ground station that could work with each side’s tech and develop shared connectivity that their airborne hardware can tap.

Loon has already developed fleet management technology because of the nature of its service, which is delivered by a collection of balloons, and that will be optimized for HAPSMobile.

The premise of HAPSMobile is very much like Loon

Outside of tech, the duo said they will create an alliance “to promote the use of high altitude communications solution with regulators and officials worldwide.”

The investment is another signal that shows SoftBank’s appetite in tech investing is not limited to up-and-coming startups via its Vision Fund, more established ventures are indeed also in play. Just yesterday, the Vision Fund announced plans to invest $1 billion in German payment firm Wirecard and its past investments include ARM and Nvidia, although SoftBank has sold its stake in the latter.

Google reshuffles its leadership in Asia Pacific

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There’s a changing of the guard within Google’s Asia Pacific business. In recent weeks, personnel changes within two of its most important roles show the search giant is entering a new era of management for its fast-growing business across the continent.

Scott Beaumont, a British executive who previously ran Google in China and Korea, stepped into the role of Asia-Pacific president following an announcement made on March 18. Following that, Google revealed today that Rajan Anandan, the executive in charge of Google’s business in India and Southeast Asia, would leave the company. VC firm Sequoia India said that Anandan, who has made a number of angel investments, is joining its ranks to oversee Surge, the early stage accelerator program that it announced in January.

A former consultant with McKinsey in the U.S, Anandan worked for Microsoft and Dell before joining Google in 2011. Under his tenure, the company executed a range of initiatives for India under its ‘Next Billion Users’ initiative which included its Tez payments service (now called Google Pay), public WiFi, local apps and a range of more data-friendly versions of apps like Maps and YouTube. Under Anandan, Google’s revenues surpassed $1 billion annually with reports suggesting that India-based income grew some 30 percent year-on-year last year.

Anandan will stay on at Google until the end of April. Vikas Agnihotri, Google India’s head of sales, will step into his role until a replacement is found, Google said.

Beaumont paid tribute in a statement:

We are grateful to Rajan for his huge contribution to Google over the past eight years. His entrepreneurial zeal and leadership has helped grow the overall internet ecosystem in India and Southeast Asia, and we wish him all the best in his new adventures.

Google certainly stands in a more competitive position in India today, but whoever replaces Anandan will need to deliver a strategy in response to Facebook’s phenomenal growth in India — where it is said to be close to $1 billion in annual revenue, with big plans for its hugely popular WhatsApp service — and continue to develop strategies for mobile.

Rajan Anandan, vice president of Google for South East Asia and India, is leaving the search giant to oversee Sequoia’s new early-stage accelerator program (Photo credit: Sajjad Hussain/AFP/Getty Images)

It isn’t clear if Anandan’s departure is related to Beaumont’s recent promotion — you’d imagine that the two were among the main candidates for the top job at Google Asia — but heading to Sequoia is no slack move, particularly given the company’s increased focus on early-stage investing and Surge.

Now some words on Beaumont, who TechCrunch understands from sources is widely-liked within Google. His tenure in China is linked with the development of DragonFly, the secretive project to develop a government-friendly search service in China, but internally his star is rising thanks to Google’s improved business position in China.

DragonFly may (may) have been shuttered, but Beaumont is credited with helping Google build revenue in China through advertising deals, with The Information reporting that China-based revenue surged by more than 60 percent to more than $3 billion last year.

Scott Beaumont, Google’s newly-appointed head of Asia Pacific is widely credited with developing Google’s business in China in recent years, but that also included the controversial work on a proposed censored search service for Mainland China (Photo credit: Sam Yeh/AFP/Getty Images)

Like Twitter and Facebook, that has included dealing with state-backed media and other organizations keen to lean on Western internet pillars to reach a global audience but, as an interesting report from The Information earlier this year showed, Google also set up robust on-the-ground systems to let SMEs and companies selling to the global market access Google services through third-party offices and resellers.

On the strategy side, Beaumont struck investments deals with e-commerce giant and HTC — which involved the acquisition of a smartphone division, in the case of the latter — inked a patent license with Tencent, put cash into some earlier stage startups and selectively launched some products in China.

It remains to be seen how Google’s China strategy will develop now that Beaumont has taken on more responsibility with a broader job and, indeed, what he will bring to Google’s overall strategy in Asia Pacific. The region accounts for around 15 percent of revenue behind the U.S. and Europe, according to Google parent Alphabet’s latest financials, with 33 percent annual growth second only to Latin America.

EC Weekly: Gaming, crypto, shipping and the multiple future strategies of tech

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Niantic EC-1

Illustration by Nigel Sussman

Greg Kumparak published the first part of his planned four part EC-1 series on Niantic yesterday, focusing on the founding story of the AR/gaming unicorn from Keyhole and Google Earth to a complicated spinout from Alphabet. Lots of great nuggets on how companies get formed and built, but one I particularly enjoyed was this one:

Like most companies, Google doesn’t like when employees leave. Especially employees who ran key parts of the company for years. Leaving means competition. Leaving means potential opportunities lost.

John [Hanke, CEO of Niantic] eventually sat down with Larry Page to figure out what it’d take to keep him within Google . They talked about John’s interest in augmented reality. They talked about a book called Freedom™ by David Suarez, which centers around an out-of-control AI that taps a network of real-world operatives to control the world (the earliest hints of Niantic’s first game, Ingress, already sneaking in here years before it’s made.)

John wanted to take his interest in AR and his background in maps and gaming and mash them all up and see what it could look like. Larry wanted it to happen within Google.

What I loved is that Eliot Peper wrote a piece for Extra Crunch just a few weeks ago about the importance of speculative fiction in the creation of startups, and also gave a guide on just what books he recommends to find your next startup.

Expect Part 2 of the Niantic EC-1 to drop early next week as we do a rolling release.

Game streaming is the new battlefield among tech giants

Bryce Durbin / TechCrunch

Game streaming is quickly becoming one of the most important strategic arenas for owning users, with offerings from all major tech and gaming companies. Devin Coldewey provided a comprehensive strategic overview of the stakes involved this week, and why so much money is being poured into a technology that until now seemed impossible due to bandwidth and latency. It’s like Super Smash Bros: Tech Melee edition:

Sidewalk Labs launches an app to crowdsource public space surveys

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Alphabet’s urban planning subsidiary announced today the launch of CommonSpace. The new app was created to give park operators and community members a place to enter and organize observations about parks and other public spaces.

Interested parties can create a web portal for a space. The organizer defines the parameters of a study, outlining what sort of data they’re looking to collect, and users are then given shifts to go about recording data. The goal is to discover how people utilize various public spaces, information that can be used to determine future changes.

“The app records data in accordance with the Public Life Data Protocol, an open data standard (published by the Gehl Institute and founding municipal and private partners) that makes it possible to compare data from public spaces,” Sidewalk senior engineer Ananta Pandey says in a blog post. “The data collected with CommonSpace can be easily exported into visualization and analysis tools that communities and space managers alike can use to see patterns, generate insights, and develop evidence-based approaches to advocating for change.”

For obvious reasons, Sidewalk is quick to note the privacy parameters it set up for the app. The company says it’s adhering to Privacy by Design, and won’t be collecting any personal information about bystanders who are observed for CommonSpace.

After being piloted at a Toronto park in the fall of last year, the app is now available for both Android and iOS.

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