Google Is a Monster

 | Apr 19, 2013 | 10:25 AM EDT  | Comments
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Google (GOOG) showed again last night in its results that it's a monster. The company handily beat on EPS, even though its revenues were light. 

More importantly, CPCs (or profitability from each search result) stabilized.  That means that it's doing great as the world switches over to mobile and doesn't have to sacrifice on profitability, which was a big concern about a year ago.

But Google is really setting the bar for innovation right now, compared to all the big tech companies (including Apple (AAPL)), and that's really what should get investors excited here.

YouTube continues to come into its own as a monster. Android -- while it faces its own questions with strong competition from Samsung and a new Android head -- is really in an enviable position in the mobile space. There were many more promises last night about new and interesting Android devices that would be coming on stream soon.

Of course, there was also some reference to Google Glass last night in Larry Page's comments. That's also a very exciting new space for them, as it really represents Google's bet on a post-phone world. But Glass is probably years away from making a dint in Google's overall business.

I think the most interesting new development that Google has -- which has really flown under the radar for months now -- is Google Fiber. In the last 10 days, Google tripled the cities where it's running Fiber. It's gone from Kansas City, to Austin and now, most recently, Provo, Utah.

Fiber is a hugely disrupting force. At its most ambitious, it aims to shut down all the cable and satellite companies making $70 a month off you for Internet service. 

Google is putting a stake in the ground and saying: we will give you this high-speed service for free. 

For Google, it means many more searches, YouTube videos and usage of other Google services.

Where is Apple or Microsoft (MSFT) or Amazon (AMZN)? They are playing catch-up here. This could be a very powerful new service in the coming two years for Google.

But one word of caution from last night's results for investors. Google scored big earnings with the help of an 8% effective tax rate. This is likely due to continued losses that drag down its Motorola group. There's no reason to believe that these losses will stop immediately, but that business continues to shrink. At some point, Google won't have those losses and smaller tax rate to help them.

Will it be next quarter or the quarter after? Not sure. But just be careful on that score for the rest of the year.

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