Google: Hello Ray, We've Been Expecting You
Joseph is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Everybody knows who Google (NASDAQ: GOOG) is, and most people use their dominant search engine on a daily basis. The company also owns YouTube and is owner of the Android operating system. The company is also quickly jumping ahead in the innovation race, but we will get to that in a moment. First, let's look at the company without considering the innovation factor and the company's momentum going forward:
We can quickly conclude that Google is a cash-loaded company with a relatively small debt load for its size, and is also a generator of massive free cash flow. The company is financially strong long-term and is in great financial shape for the short-term as well, supported by a rock-solid balance sheet and a current ratio of almost 4.
Google's Android operating system has seen tremendous growth, with Android shipments up 91.5% during the third quarter. According to Gartner, Android captured 72% of global market share in the third quarter, with Apple's (NASDAQ: AAPL) iOS getting only 14%. The iPhone 5 was most recently introduced in China, but it may be too early to determine either the success or the failure of the release. Apple recently failed to strike a deal with China Mobile (NYSE: CHL), losing out to Nokia (NYSE: NOK) who will be providing China's largest provider (and their millions of subscribers) with their Lumia 920T smartphone.
Apple does, however, still hold the lead in the United States market, aided by the iPhone 5 release. Selling smartphones is less of an issue to Google than Apple though, because the company doesn't really make much on hardware sales, and basically gives Droid away to get revenues from the advertising that is generated from its OS and search engine on Android and other devices. This is why increasing iPhone sales may also be a plus for Google (and maybe even Nokia)- especially when an issue such as Apple's Mapping inadequacy arises.
Both Nokia, and most recently Google, have introduced mapping apps for the iPhone that will help them monetize off of Apple iPhone sales. Youtube and Google's search engine are likely to see continued use on iPhones as well. Google, in fact, has actually generated more mobile revenue from iOS than it has from Android in the past, and that trend may continue as long as the iPhone remains popular. Whether Android or iOS is winning in smartphones, Google is generating revenues from both sides.
Leading in Innovation
Now let's get to the innovation factor. Google Glass is taking the lead in augmented reality (AR). Google's glasses are still unavailable to the public, but may be the future- as wearable devices are starting to become an interest of an increasing amount of companies. Microsoft (NASDAQ: MSFT) has also shown more than just interest, already filing patents for augmented reality glasses themselves. Google, however, seems to be far in the lead in developing the first set of AR glasses, which may one day take the mobile revolution and ramp it up to a whole other level. Project glass isn't the only science-fiction becoming reality at Google, either.
"There is much left to design and test, but we have now safely completed more than 200,000 miles of computer-led driving, gathering great experiences and an overwhelming number of enthusiastic supporters..."
One possibly enormous supporter? Ray Kurzweil.
The Kurzweil Effect
Ray Kurzweil, Google's most recent hire, is a legendary futurist and artificial intelligence expert. Kurzweil will take on the job of director of engineering and will focus on language processing, machine learning, and most likely many ahead-of-the-curve ideas that only he is capable of coming up with. Landing Kurzweil should be huge, not only in attracting the most talented engineers and for his name recognition, but for his talents as well- especially if they are applied in mobile innovation. Kurzweil blogged about his new employer, stating:
"In 1999, I said that in about a decade we would see technologies such as self-driving cars and mobile phones that could answer your questions, and people criticized these predictions as unrealistic... Fast forward a decade—Google has demonstrated self-driving cars, and people are indeed asking questions of their Android phones. It's easy to shrug our collective shoulders as if these technologies have always been around, but we're really on a remarkable trajectory of quickening innovation, and Google is at the forefront of much of this development."
Seems like Google and Kurzweil were made for each other, and the synergy between them may produce incredibly innovative products for years to come.
The Bottom Line
The landing of Ray Kurzweil has to give Google tremendous momentum going forward. Even if it doesn't, however, the company is a juggernaut. Google is extremely strong financially and generates huge amounts of revenues and cash. They are looking to lead in innovation, which is vital to the sustainability of a company in the infinitely fast moving, innovate-or-die technology sector. Actions speak louder than words, and landing an enthusiastic Ray Kurzweil is a huge action.
Jharry1 owns shares of Nokia. The Motley Fool owns shares of Apple, China Mobile, Google, and Microsoft. Motley Fool newsletter services recommend Apple, Google, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!