Google to ‘Scale Internationally’ With Nest Part of ‘New Frontiers’ Commitment

Google’s goal with the purchase of connected home device company Nest, which it agreed to buy earlier this month for $3.2 billion in cash, is to help build “scale,” said Google Chief Financial Officer Patrick Pichette on an earnings call late Thursday. Nest and Google share a “common vision” that “technology should be doing the hard work so that people can get on with their lives and do great things,” Pichette said. He called the acquisition a “terrific opportunity” to be able to use Google’s resources to reach broader audiences “and then scale internationally,” he said.

Google is continuing to invest in three focus areas: search and display advertising; consumer businesses including Google Play/Android, YouTube and Chrome; and new businesses including social, commerce and enterprise, Pichette said. The Motorola unit, which Google agreed to sell last week to Lenovo for $2.9 billion, had revenues of $1.24 billion for the quarter. Consolidated revenues at Google in Q4 grew 17 percent to $16.86 billion, he said.

On the pending sale of Motorola Mobility, Pichette credited Motorola with having strengthened the Android ecosystem and called the sale a “win-win” for both companies. He cited the Nest acquisition and efforts with Google Glass and wearables products, calling them proof of the company’s commitment to innovation and hardware in areas that are “enterprising” and that promise “new frontiers.”

In Google’s hardware segments, eight of the top PC makers, including Dell and Toshiba, are making Chromebooks, said Nikesh Arora, chief business officer for Google. The company had a “strong holiday season” on Chromecast sales, said Arora, and Google added streaming services Hulu Plus, HBO Go and Pandora to its content roster, he noted. One in four devices sold into K-12 education in the U.S. use a Chromebook, he said, citing figures from Futuresource. He also highlighted Google’s efforts in automotive as it joined Audi, GM, Honda, Hyundai and Nvidia to form the Open Automotive Alliance.

Credit Suisse rated Google an “outperform” following the earnings release on volume growth in clicks that were up 31 percent year-over-year in Q4. Analyst Stephen Ju said click volume growth is an indicator of Google’s revenue growth potential “as mobile pricing marches toward where they already are on desktop.” Core Google segment revenue posted “very healthy growth in Play,” he said, noting an improvement in incremental margins. Ju maintained a target price of $1,450.

In response to a question on possible monetization of YouTube through professional content such as sports, Pichette said Google talks to a range of content providers -- “large and small across the entire spectrum” -- because the company wants creators of any size to be able to build an audience of scale. On a possible tie with the NFL, Pichette said, “It’s hard to comment on a particular piece of content because it starts a whole series of conversations. But we would welcome any content on YouTube as long as people felt that it would add value to the end users and as long as there is a right economic model associated with it.” Google shares closed 4 percent higher Friday at $1,180.97.