The Alphabet of Google and Other Bets ready to report results

Come Monday, “A” will stand for “Alphabet,” “G” will mean “Google,” and “OB” will mean “Everything Else.”

OK, actually, it will mean “Other Bets,” at least in the new terminology used by Alphabet, the holding company established by Google last summer. And as the name implies, it will encompass everything that Alphabet is, well, betting on that doesn’t include Google and its search, maps, YouTube, Android, Chrome, Google Play, Apps, Cloud, Chromebooks, Nexus and virtual reality offerings that will make up most of of the company’s fourth-quarter earnings and revenue results.

And if all of that wasn’t enough of a mouthful, try rolling all of this off your tongue for what Other Bets will include:

  • Access/Google Fiber
  • Calico (A biotech R&D venture)
  • Nest (Those fancy-looking home thermostats you see at Home Depot and other hardware stores)
  • Verily (What used to be called Google Life Science)
  • GV (Formerly called Google Ventures)
  • Google Capital
  • X (Or, what was once called Google X, and a sort-of skunk works-type operation headed up by Google co-founder Sergey Brin that is researching things like driverless cars and Google Glass.)

Since Alphabet says it is trying to be more transparent with where its earnings and sales come from, the company will for the first time break down its finances by reporting revenue for Google, and the Other Bets, as well as operational results, including and excluding stock-based compensation, capital expenditures and depreciation, amortization and impairment for both segments. Alphabet will also report total income and revenue for everything put together.

By that measure, analysts surveyed by Thomson Reuters estimate Alphabet will earn $8.10 a share, on $20.8 billion in revenue, compared with a profit of $6.88 a share on sales of $18.1 billion in the year-ago period.

One of the main things to keep in mind with the report will be what Alphabet says not only about revenue from Other Bets, but the expenses the company is putting into such ventures. Analyst Anthony DiClemente, who covers Alphabet for Nomura, estimates that Alphabet invests around $3 billion a year in Other Bets, and the figure will be a key one for investors to keep in mind.

“The trajectory of the Other Bets spend will be most important to investors, with narrowing spend on Other Bets being perceived more constructively than steepening spend,” DiClemente said in a recent research note. “It’s possible investors underappreciate the value of Other Bets, which could soon change.”

And with Alphabet preparing to launch a new quarterly reporting structure upon the world, it might also be about to launch past Apple to be the world’s most valuable company. As Apple’s stock price has taken a pounding over the last year, the gap between Apple’s and Alphabet’s market capitalizations has narrowed, giving Alphabet a chance to possibly knock Apple from its perch in a matter of days.

Photo: Building 40 at the Googleplex in Mountain View, with Google’s new logo, in September 2015. (Matt O’Brien)

 

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