Since Google Inc. was founded in 1998 and incorporated in 2003, it has been focused on technology innovations to help its users find the information with unprecedented levels of ease, accuracy and relevancy. Google primarily concentrated on the areas of search, advertising, operating systems and platforms, enterprise and hardware products. These programs include AdWords, AdSense, Google Display and Google Mobile, with Android and Google Chrome serve as its operating system and platforms.

Google generate revenues primarily through delivering advertising to promote products and services for businesses. Currently, it moves to new area, except for providing specific features to mobile device users, Google also operates in mobile segment, as it made an acquisition of Motorola Mobility Holdings Inc. (Motorola) on May 22, 2012 (acquisition date).

Industry Position:

Google Inc. competes with other players in the Internet Information Providers industry within the technology sector. Although there are competitors worldwide, the key players are recognized as general-purpose search engines, such as Yahoo and Microsoft’s Bing, and social networks, such as Facebook and Twitter. Because of its years of focus on technology innovation and huge amounts of expenses in R&D every year, Google has become the global technology leader and one of most well known general Internet search engine all around the world.

Comprehensive Analysis

Part 1: Liquidity situation analysis (see Exhibit 4 graph)

Based on the statistics on Google Inc.’s financial statements, there is a continuing increase in its revenues and net income, showing a tremendous and overall healthy growth path. Moreover, from the ratio exhibit, from 2008 to 2009, Google’s current ratio (change from 8.77 to 10.62), quick ratio (from 8.03 to 10.08) and its free cash flow (from1754 to 2510) all have a big jump. However, we all know that the severe worldwide recession happened at the same time period, it seems Google didn’t feel the shock if we only see from these numbers-but it is not true.

On the one hand, the recession spread all over the world, even the mighty search giants cannot escape from it. If we put aside those annual numbers that only show final results, Google revealed its first quarter in 2009 web search declined in sales, which forced Google to make cutbacks in online advertisements spending. At the same time, Google announced two rounds of job cuts. Because of the actions of cutback on cost, Google finally beat its 2009 profit expectations -this can be shown in Google’s income statement exhibit, the “Total operating expenses” of 2009 is $6494 million, which is lower than $6542 million of 2008, given Google is expansion scale, it proves the management’s action of cutting cost sharply.

However, on the other hand, even influenced by recession, Google’s investors were relatively optimistic than others’, since Google’s slowdown still looked good compared with the other players. Moreover, some investors and observers believed that the recession gave a golden opportunity for Google to increase its value and gain more shares in the overall market-since almost all of Google’s revenue come from advertisements that are placed next to customers’ search results, during recession, more and more businesses would choose cheaper advertisements to promote their products, such as Google’s online “Pay Per Click (PPC)”, rather than the traditional offline advertisement which used to work well before recession. From this point of view, as their competitors in traditional media cannot keep up, Google got this opportunity to effectively control the online space. As a result, during recession, Google’s liquidity situation improved as shown the increase of their current ratio, quick ratio and free cash flow (as the reduced cost and shut down of some projects have released more capital that can be used to reinvest).

However, after the recession, from 2009 to 2010, we can see a rapid decline of its liquidity ratios (e.g. Current ratio from 10.62 of 2009 to 4.16 of 2010), this is because after recession, Google continued to reap the growth of digital economy. It gave Google a huge opportunity to stretch in the market since the shift of consumers and advertisers from offline to online continued unabated, and it fueled Google’s growth in its core business-search advertising.