Groupon: Global Technology Initiative, but Silence on Costs!
George is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Groupon Inc. (NASDAQ: GRPN) announced some better results and encouraged the market to keep believing. Investor relations is subtly promoting the classic buy and hold let us do the work approach to investing. OK, so a new tech company out of the chute should be showing improvement. That's what investors have bought into: a rapidly improving story. Note the emphasis on "rapidly."
In reading the conference call transcript, I was struck by a comment made by Andrew Mason, CEO, on the second page. He announced Groupon had kicked off their first major global technology integration initiative. According to Andrew Mason, there will be some foundational rebuilding in the short-term, but he believes that over the long-term this project will allow Groupon to move much faster and more easily apply its technology.
Err, excuse me. What does this all mean? Just what is a global technology integration initiative? You are a brand new tech company with a lot of answers supposedly. Everyone anticipated a global approach. Given that you are so brand new, what has happened that you need a global integration initiative? What did or did not happen to your platforms? Class action lawyers need to review the underwriting documents. Was this requirement identified?
At this point there is no mention of costs, but Groupon does have the ability to say "As previously disclosed." This gives them some wiggle room in the Reg FD challenged space. Not one analyst picked up on the point in the conference call. So we have no explanation as to the true scope and nature. Groupon can rightfully say we mentioned it in the conference call, but no one wanted to talk about it.
Well Groupon, in the interest of clarity and visibility, why don't you add more color on that point. If it is important enough to mention it from the CEO's lips, then it must have big costs and a big impact. How can investors feel well informed without understanding the scope, scale and costs.
OK just to be fair lets look at few other Internet companies and see what they are doing in terms of R&D. In the April 12 conference call Google (NASDAQ: GOOG) the granddad of them all, discussed the efforts behind various ventures such as Chrome, Google Play, and Google Plus. Larry Page spoke of putting down the big bets that were necessary to keep Google dominant. Everyone understood what he was talking about. Everyone knows what Google Chrome is attempting to achieve along with the other products. There was no fuzzy verbiage about global integration. What was similar to Groupon is that the CEO discussed the issue in the prepared remarks section. But thats Google; everything is huge or they don't care. But the global experience needs to be the same. If you live and work in the US your search results need to be similar to what they would be when you travel to say Singapore. You as an individual have not changed your individual contextual perspective.
Lets take a look at a smaller but highly focused player Trip Adviser (NASDAQ: TRIP). Their revenues are just slightly smaller than Groupon but they are profitable. Again the CEO Stephen Kaufer in his prepared opening remarks discusses similar issues and says they have reinvested into long term growth and ensuring the unique visitor keep returning to find where the hotel and travel bargains are. This is a similar concept to Groupon, but focused just on travel. Groupon is trying to operate in this space, but does not seem to be knocking Trip Adviser off stride. Trip Adviser is delivering repeat customers. But the global experience is seamless. It has to be seamless globally. If you are planning a trip or need to make changes on the fly, which can get very tricky, you need to have a reliable but individualized contextual experience.
So Groupon, lets get back to you guy's. Just what is a Global Technology Integration Initiative? Because no one else seems to be doing it.
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