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January 23, 2013

Google Looks to Cash in on the Cloud

By Erin Harrison, Executive Editor, Cloud Computing

Yesterday, Google reported its fourth quarter earnings, with revenue in its core Internet business increasing by 22 percent to $12.91 billion. The company reported consolidated revenue that includes its lagging Motorola (News - Alert) Mobility mobile phone business of $14.42 billion. While the Internet search giant beat Wall Street predictions, the value of its ads continue to decline, an especially sticky problem considering Google’s new search competition from Facebook.

These issues aside, it appears Google is banking on its cloud business to bolster profits this year.

Technology Business Research (TBR) approximates that Google’s cloud business, which consists of Google Apps, Google App Engine and Google Compute Engine (no ad-related revenue), generated $97 million in the fourth quarter and $314 million in the year, estimating Google’s cloud business grew 83 percent year-over-year.

The company’s “other” category in which Google’s cloud business’ revenue is categorized, grew at the fastest rate in four years, 102 percent year-to-year, according to Jillian Mirandi, an analyst with TBR.

“Although the company attributed high ‘other’ growth to Google Play and content sales, we believe that Google Apps had positive impact on growth as well,” Mirandi said.

An increasingly competitive Infrastructure as a Service (IaaS) market saw Microsoft (News - Alert) cut Windows Azure Storage prices by 28 percent in December. Google is aiming to gain IaaS market traction by capitalizing on cross-sell opportunities via integrating Google Compute Engine into its end-to-end portfolio (SaaS (News - Alert), PaaS, IaaS) of easy-to-deploy software, cloud and social networking products.

Lots more information on cloud computing solutions, specifically for small to medium-sized businesses, will be discussed at Cloud4SMB Expo next week during  ITEXPO Miami 2013.

In addition, TBR predicts that Google will continue to successfully monetize Apps for Business (which TBR estimates accounted for $65 million, or 67 percent of Google’s cloud business’ revenue in 4Q12) due to its satisfactory features being sold at competitive price points, a similar facet that has helped Apps for Government gain traction in 2H12.

Some analysts are saying Google Apps might give Google the advantage over Microsoft it has been looking for.

“Google certainly has the price advantage over Microsoft,” said Sara Radicati, president and CEO of The Radicati Group (News - Alert). “It’s hard to compare the two in many ways, since they are hitting different areas, but Google has a simple, easy-to-understand pricing structure that makes it easy for an organization to budget and plan for. Microsoft has one of the most complicated structures.”

In other earnings details, Google reported consolidated net income for Q4 was $2.89 billion or $8.62 per share, compared to $2.71 billion, or $8.22 per share, for the same period last year.

“We ended 2012 with a strong quarter,” Larry Page (News - Alert), CEO of Google noted. “Revenues were up 36 percent year-on-year, and eight percent quarter over quarter. And we hit $50 billion in revenues for the first time last year – not a bad achievement in just a decade and a half. In today’s multi-screen world we face tremendous opportunities as a technology company focused on user benefit. It’s an incredibly exciting time to be at Google.”

Meanwhile, investors appear happy with Google’s fourth quarter results, with GOOG stock up $44 per share on Wednesday morning, a more than six percent increase.

Want to learn more about cloud computing solutions geared specifically towards small to medium-sized businesses?  Don’t miss the Cloud4SMB Expo, collocated with ITEXPO Miami 2013, Jan 29- Feb. 1 in Miami, Florida.  Stay in touch with everything happening at Cloud4SMB Expo. Follow us on Twitter.

Edited by Brooke Neuman
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