Google Has a Great Q1 2012; Founders Want to Split Stock for Greater Control
By on April 13th, 2012

Google announced its earnings for Q1 2012, posting gross revenues of $10.65 billion, up 24% year-over-year. Its traffic acquisition costs (TAC) remained stable at 25% of the gross revenue. Google saw net income of $2.89 billion this quarter.

Its revenue growth was driven by a 39% increase in aggregate paid clicks, which compensated for a 12% decline in the average cost-per-click. This trend is expected to continue as mobile search advertising forms a large piece of the search advertising pie that Google commands the largest share of.

Its cash, cash equivalents and marketable securities now add up to $49.3 billion, nearly half of what Apple’s reserves were at the end of 2011.

While the numbers were good, they weren’t the most interesting part of the earnings release.

Google’s management team is trying to float a new class of stock with no voting rights. It will be offered as a stock dividend to existing shareholders — effectively a stock split — but will enable Google’s founders to retain their current level of control, which is slowly being diluted away due to stock based compensation for employees and acquisitions where part of the payoff is in Google stock.

Google already has a dual class stock structure, with class A and class B shares. Class B shares have 10 votes per share, while class A shares have only one. The new class C shares will have no voting rights at all. They will trade separately from normal Google stock, possibly at a discount due to the lack of voting rights.

With this move, Google’s founders will have more control over the destiny of Google, and be able to focus on long-term plays without having to make short-sighted moves to increase short-term profit.

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Author: Pathik Google Profile for Pathik
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Pathik has written and can be contacted at pathik@techie-buzz.com.
 
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