Hey Google! Isn’t it about Time to Share the Wealth?
Tim is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
As always there’s a lot happening in the world of Google (NASDAQ: GOOG). At long last it appears our friends in the Far East have given the okay to the $12.5 billion Motorola Mobility Holdings (NYSE: MMI) deal – something U.S. and European regulators rubber stamped several months ago.
And let’s not forget what is quickly becoming the norm - suing the company for any number of things. The EU antitrust probe continues, and now Iran (who?) is in a tizzy about Google’s decision to drop the Reuters feed in the Persian Gulf region – whatever. Of course, when you get to be the size of Google and carry that much weight in the industry you’re an easy target. It’s to be expected.
As for the deal this was a great move on management’s part from the get go. Google’s willingness and ability to continually expand their product and service lines has been a key to the company's ridiculous growth. And now with the Motorola deal under their belts – it’s expected to close as early as next week – Google is now a serious player in the hardware/mobile device marketplace. And let’s not forget there are all those patents Google will inherit – somewhere around 24,000 of them - which many believe is worth the price of admission right there.
Even more intriguing about this deal is what the Motorola acquisition provides the company in the world of multimedia content and delivery platforms – let alone expanding Google’s already formidable Cloud technologies. That sound you hear? That was the collective groan from Netflix shareholders around the world wondering why everyone keeps picking on ‘em.
As for the stock price, in spite of what are extremely sound financials – consistent revenue growth, significant gains in annual operating cash flow and a steadily improving balance sheet – the company is trading down over 3% the past week alone and has meandered in the middle of the industry pack for months. Outside of Microsoft (NASDAQ: MSFT) doing all the right things (here’s a bit more on that) but still getting the cold shoulder by investors and analysts, Google remains one of the best values in most any sector. What’s a company to do to get a little love around here? Ahhhh, that question brings us right back to the aforementioned balance sheet.
Share the Wealth
Though not quite in the same boat as Apple (NASDAQ: AAPL) and their embarrassment of $100 billion balance sheet riches a while back – the impetus for the recently enacted dividend – Google is quickly finding themselves in a similar situation. The company is flush with cash that is growing daily and has very little in the way of debt – regardless of the soon-to-close Motorola Mobility acquisition.
The nearly $50 billion in cash is up about 40% from the same period a year ago – and over twice what it was just two years back - and the trend isn't going to end anytime soon. With that said, isn’t it about time shareholders started enjoying some of this cash? Not according to Google. The company's Investor Relations page has this to say “…the company has never declared or paid a cash dividend nor do we expect to...” Why? So they can leave about $50 billion sitting in a T-bill somewhere? It’s time to share the wealth – ala Apple – and you can throw in a stock buyback plan for good measure. Either or both would help the stock price almost immediately.
Naysayers will point out the need for funding continued R&D and the expansion of products and services – couldn’t agree more. But here’s the beauty – Google cranks out so much cash they can – and obviously have, which is why the balance sheet is exploding – fund growth without dipping into the coffers.
So there you have it Larry and Co. - the time has come for the company’s owners to share in the spoils. Fork it out.
timbrugger has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, Google, Microsoft, and Netflix. Motley Fool newsletter services recommend Apple, Google, Microsoft, and Netflix. 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.If you have questions about this post or the Fool’s blog network, click here for information.