Google's Newest Acquisition Fuels Growth Story

Maxwell is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Last week, Google (NASDAQ: GOOG) announced that it had acquired BufferBox for an undisclosed fee. BufferBox offers a parcel storage and pickup service similar to Amazon locker. The company provides users with temporary lockers where they can retrieve packages they order online. Google intends to exploit BufferBox's idea of touching customers as part of an end-to-end experience in the package delivery sector. It will be Google's twelfth acquisition for 2012. Fortunately, most of Google's acquisitions have added value to the company. The growth stories surrounding them justify their purchase.

For example, on April 2, Google announced that it has acquired TxVia Online Payment. Google's acquisition was a payment technology company. "Their leadership team has played an instrumental role in defining the fast-growing prepaid card segment of emerging payments,"said Osama Bedier, Google's Wallet and Payment VP. "We've worked closely with TxVia over the last year, and they're a forward-looking team that will help us take the next steps in realizing the future of e-commerce. We welcome the TxVia team to Google."

In its first quarter financial report, Google reported revenues of $10.65 billion, representing a 24% increase over first quarter 2011 revenues of $8.58 billion. Google-owned sites generated revenues of $7.31billion, a 24% increase over first quarter 2011 revenues of $5.88 billion. Google partner sites generated revenues of $2.91 billion, a 20% increase from first quarter of 2011 network revenues of $2.43 billion.

On June 5th, 2012, Google acquired Quickoffice. The acquisition allowed users to create and edit Microsoft Word, Excel, and PowerPoint documents on their 300 million mobile devices in more than 180 countries. "We're happy to announce that we have acquired Quickoffice, a leader in productivity solutions," said Allan Warren, Google's Engineering Director. "Today, consumers, businesses, schools use Google Apps to get stuff done from anywhere, with anyone, and on any device. Quickoffice has an established track record of enabling seamless interoperability with popular file formats, and will be working on bringing their powerful technology to our Apps Product Suite."

Google's revenue for the second quarter ended June 30 was $12.21 billion, an increase of 35% compared to the second quarter 2011. Google-owned sites generated revenues of $7.54 billion, a 21% increase over second quarter 2011 revenues of $6.22 billion.

On July 29th, Google announced the acquisition of Sparrow, an e-mail client for iOS and Mac users that is widely considered an improvement over Gmail app for iPhone and Apple's (AAPL) Mac Mail app. It was a full acquisition, meaning Sparrow's Paris-based team will join Google. "The Sparrow team has always put their users first by focusing on building a seamlessly simple and intuitive interface for their e-mail clients," a Google spokesman said. "We look forward to bring them aboard the Gmail team, where they will be working on new projects."

Google's revenues for the quarter ended September 30 rose to $14.10 billion, an increase of 45% compared to the third quarter of 2011. Though amortization expenses of acquisition were $317 million for the quarter compared to $125 million in the third quarter of 2011, Google-owned sites generated revenue of $7.73 billion, a 15% increase over third quarter 2011.

If we categorize all the acquisitions according to Google's division, here is what we get. Android - BufferBox, NikSoftware, and Viewdle Facial Recognition. USA Google - Milk, Quickoffice, Meebo, Wildfire Interactive, and Frommer's Travel Guides. Google Offers - Incentive Targeting. ESP Google - Virus Total.com. Gmail - Sparrow. And Google Wallet - TxVia Online Payment.

It is noteworthy that BufferBox is this year's third acquisition placed under Android. It is understandable that it is one of the fast-growing divisions, and gaining a head start for Google. It is however clear that with the acquisitions; Google has been consistently improved in comparison to the previous year.

Let us check how Google is performing with the rest of the companies. With an earnings per share of 31.91, compared to 0.19 for Facebook (NASDAQ: FB), 0.35 for Yahoo (NASDAQ: YHOO), and others below that mark, and a price-to-earnings ratio of 21.88, compared to 145.08 for Facebook and 14.71 for Microsoft (NASDAQ: MSFT), Google does seem well positioned. Its operating margin is 28%, compared to 12% for Facebook, 16% for Yahoo,  and 5% for the industry average. It is also significant that Google is the biggest company in the niche it is operating. Looking at the successive acquisitions in the upcoming markets and constantly improving margins, we can safely say Google is a good buy at the moment.


StockCroc1 has no positions in the stocks mentioned above. The Motley Fool owns shares of Facebook, Google, and Microsoft and has the following options: long JAN 2014 $20.00 calls on Facebook. Motley Fool newsletter services recommend Facebook, Google, Microsoft, and Yahoo!. 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!

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