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Alphabet Loses $859M on 'Moonshots' in 2Q 2016

nytimes.com

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Re: Alphabet Loses $859M on 'Moonshots' in 2Q 2016

#161

Post by AnAfrican »

rm_-rf_slash wrote: post #148
nibs wrote: post #140

Earlier quoted context omitted.

Spent: verb, to spend, you could spend money settling a lawsuit but it would be a stretch to call that investment. Investment: to allocate money in the expectation of future benefit, so that could mean administrative expenses, which would cover and include a lot (but not all) spending. My vote would be on invested.

It's all about the perspective. A manager might consider test-driven development or security-driven development a matter of "spending" - in that it costs time and money and doesn't provide an immediate tangible benefit compared to making the thing that makes the money - but the engineers see it as an investment. Both sides are right. If the company is never hacked, then it could both validate the security model as we…

it could even get more complicated.

in your example, even if the security-driven development generates value by preventing a hack, it could simply be considered Cost of Goods Sold, or maintenance costs...

In accounting standards, Investment turns into an asset.

-> CCTV system = investment -> security guard = cost

they both generate value by increasing security and the dinstinction is not related to their usefullness for the company.

Re: Alphabet Loses $859M on 'Moonshots' in 2Q 2016

#162

Post by TheOtherHobbes »

drawkbox wrote: post #111
zaroth wrote: post #33

I don't think it's right to equate R&D spending with "losses". Google makes a profit, not a loss, so technically it does not have losses. It has expenses, and among those, investments in future technology. If all Google could do with their cash flow was pay a dividend, that would be very sad, and it would call for a much lower P/E ratio. This article completely misstates the facts. Perhaps the way they break out thei…

I agree the market has a hard time justifying R&D and that is a problem. That is why small companies/startups can disrupt and innovate faster. Another way is like Amazon, they just spend all the profit back on R&D and prevent much of this profit/growth talk, it stays focused on competition and future goals. They are in a constant state of R&D by reinvesting profit. Spending on R&D should be seen as good in a tech wor…

Spending on R&D should be seen as good if it generates useful results and eventually turns into a revenue stream - no matter how indirectly.

Amazon is great at this kind of R&D, because Bezos seems to spend all of his free cycles asking himself if there's something else Amazon can do to make money. So Amazon R&D is primarily return-led.

No one else works quite like that. Google seems to have thrown a lot of money at R&D, but it's not obvious how much of a return it's going to generate. Apple and MS are in the same boat.

MS does very cool research, but mostly lacks the management to turn the research into viable products. There's a huge disconnect between the products MS could be shipping, and the products MS is shipping.

Apple has been spending more on R&D, but seems to be marketing and image-led - possibly based on the assumption that's how Jobs worked. (He didn't.)

Alphabet R&D seems engineering-led - which is great for engineers, but isn't a famously effective way to find new customers and generate more income.

Re: Alphabet Loses $859M on 'Moonshots' in 2Q 2016

#163

Post by diydsp »

whack wrote: post #120
zaroth wrote: post #33

I don't think it's right to equate R&D spending with "losses". Google makes a profit, not a loss, so technically it does not have losses. It has expenses, and among those, investments in future technology. If all Google could do with their cash flow was pay a dividend, that would be very sad, and it would call for a much lower P/E ratio. This article completely misstates the facts. Perhaps the way they break out thei…

Genuine question: Has Google ever achieved financial success with a moonshot project? Google Glass seems to have come closest to becoming an actual product, but it eventually crashed and burned as well. The self-driving car was a great technological success, but I really wonder how Google plans to monetize it. Years ago, when Google was the only major company doing self-driving-cars, there was a lot of buzz and poten…

I don't know about your personal definition of success...

but R&D like this is excellent PR. It helps the buzz keep going, attracts smart people, keeps the stock up.

It also intimidates other companies and can be used strategically to mislead them and keep them on their toes.

Re: Alphabet Loses $859M on 'Moonshots' in 2Q 2016

#164

Post by kalleboo »

jahnu wrote: post #67
zaroth wrote: post #33

I don't think it's right to equate R&D spending with "losses". Google makes a profit, not a loss, so technically it does not have losses. It has expenses, and among those, investments in future technology. If all Google could do with their cash flow was pay a dividend, that would be very sad, and it would call for a much lower P/E ratio. This article completely misstates the facts. Perhaps the way they break out thei…

Playing devil's advocate here (a little) but imagine they took a few dozen million of that and, say, improved their development tool chains for Android (which are disappointingly flaky). Or another few dozen millions and extended the security updates for Nexus phones by a couple of years. That could grow their market share of both developer mind-share and consumers. Moonshots maybe should come once you've mastered al…

> improved their development tool chains for Android (which are disappointingly flaky).

To compete with what, Xcode?

Strategically they're almost better off inspiring others to make better third-party Android dev tools to open up the space

Re: Alphabet Loses $859M on 'Moonshots' in 2Q 2016

#165

Post by on_and_off »

jahnu wrote: post #67
zaroth wrote: post #33

I don't think it's right to equate R&D spending with "losses". Google makes a profit, not a loss, so technically it does not have losses. It has expenses, and among those, investments in future technology. If all Google could do with their cash flow was pay a dividend, that would be very sad, and it would call for a much lower P/E ratio. This article completely misstates the facts. Perhaps the way they break out thei…

Playing devil's advocate here (a little) but imagine they took a few dozen million of that and, say, improved their development tool chains for Android (which are disappointingly flaky). Or another few dozen millions and extended the security updates for Nexus phones by a couple of years. That could grow their market share of both developer mind-share and consumers. Moonshots maybe should come once you've mastered al…

TBH, it feels like they are already ramping up the Android team.

The support lib development pace seemed to have really picked up some steam this year.

Of course they could do more, for example :

- a really open support lib repo where you can really easily push contributions on something like github, gitlab, etc..

- start working on a replacement for Java .. Java 10 is better than what we have right now but still way behind kotlin or swift..

- do even more in the support lib. They are dozen of points of the material specs not covered by the platform right now.

- do something about android updates. It looks like a political issue though, so not sure there is a solution.

I don't feel like they are not investing in Android though, all the contrary.

Re: Alphabet Loses $859M on 'Moonshots' in 2Q 2016

#166

Post by knowaveragejoe »

melling wrote: post #138
eru wrote: post #130

Earlier quoted context omitted.

Doesn't matter too much what Google/Alphabet shareholders think. The controlling majority is with the founders, and the company is not going to the markets anytime soon to ask for more capital.

"any time soon" What exactly does that mean? The next two years? If people start dumping your stock, I'm sure there will be repercussions.

Well, to be fair, people probably won't be dumping their stock over this news.

Re: Alphabet Loses $859M on 'Moonshots' in 2Q 2016

#167

Post by zaroth »

eli_gottlieb wrote: post #122
Retric wrote: post #121

Earlier quoted context omitted.

In terms of internal projects gmail, and local maps comes to mind. If your going to call everything that did not work a moonshot then by definition no. However, it's only a failure when they give up so self driving cars are rather undecided at this point, and theses projects help recruiting which has non obvious benefit.

The important question is whether something was designated a "moonshot" before it succeeded or failed, thus giving us an unbiased sample.

I think moonshot, by definition, means 15+ year timeframe to full realization. Google is a very young company, they just haven't had piles of cash to invest in moonshots for long enough for us to have seen the results. X was founded just 6 years ago, Alphabet was founded just last year!

To be asking 6 years in where are all the moonshot successes already? I think this demonstrates exactly how problematic and pervasive short-term thinking is.

The question to ask is in 50 years, how many different $10B+ revenue streams will Alphabet have?

If we really think this R&D isn't going to pay off, at the scale Alphabet operates, that's almost like losing faith in humanity.

Re: Alphabet Loses $859M on 'Moonshots' in 2Q 2016

#169

Post by melling »

manarth wrote: post #151
melling wrote: post #115

Earlier quoted context omitted.

Company X invests billions into the "future". This continues for 5-10 years without results turning into profitable products or direct improvements. Shareholders begin to question the value of those investments. "Is the R&D being well spent?" Google hasn't turned any moonshot into a profitable product yet, right? They're going to need a winner or two to convince investors. Apple will be in the same position in a few…

On the other hand, if research for a particular moonshot ends up creating something that the other products can use (and become more profitable/successful as a result) - such as Google Brain - the moonshot itself doesn't need to succeed for the project to be considered worthwhile.

Yes, that would fall under direct improvements, right? You can link the research to a profit use.

Re: Alphabet Loses $859M on 'Moonshots' in 2Q 2016

#170

Post by melling »

knowaveragejoe wrote: post #166
melling wrote: post #138

Earlier quoted context omitted.

"any time soon" What exactly does that mean? The next two years? If people start dumping your stock, I'm sure there will be repercussions.

Well, to be fair, people probably won't be dumping their stock over this news.

To be really fair, I didn't say they would. I was addressing the long-term impact of spending large sums of money without any clear benefit.

People are usually content while a company is growing fast enough.

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