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Mobile, video pump up profit at Google parent Alphabet By Glenn CHAPMAN San Francisco (AFP) Oct 28, 2016
Google parent Alphabet on Thursday delivered higher profits for the third quarter, lifted by gains in mobile and video advertising as the tech giant narrowed losses on its "moon shots." Net profit climbed 27 percent to $5.1 billion. Revenue rose to $22.5 billion from $18.7 billion in the same period a year earlier. Shares rose nearly one percent in after-market trades that followed the release of the stronger-than-expected earnings figures. "We had a great third quarter," Alphabet chief financial officer Ruth Porat said in the earnings release. "Mobile search and video are powering our core advertising business and we're excited about the progress of newer businesses in Google and Other Bets." The California internet titan revamped its corporate structure more than a year ago, making Google's internet operations a division of Alphabet and putting units such as autonomous cars and internet service balloons in an "other bets" or "moonshots" category. The self-driving car effort that was once part of the X lab at Google -- devoted to bold, futuristic projects -- has become a separate business unit at Alphabet. Little has been revealed of its plans for going to market. The loss reported from Other Bets in the recently ended quarter came to $865 million, compared with $980 million in the same period a year earlier. "As we reach for moonshots that have a big impact in the longer term, it is inevitable that some efforts will have more success than others," Porat said. "We are taking the steps necessary to lay the foundation for a stronger future." - New hardware strategy - Under its new structure, Alphabet is seeking to expand beyond its role as a search engine that provides advertising linked to queries. It has grown revenue in mobile search but is moving to further diversify its revenue stream. Earlier this month, Google took on rivals Apple, Samsung and Amazon in a new push into hardware, launching premium-priced, in-house designed Pixel smartphones and a slew of other devices showcasing artificial intelligence prowess. Google also revealed details about its new "home assistant" virtual reality headset and Wi-Fi router system. But getting more heavily into hardware would entail new costs in the current quarter, Porat cautioned. "We expect to spend more on marketing in the year-end quarter due to the new products," she said. The company recently put on hold its "Fiber" initiative, which aimed to deliver ultrahigh-speed residential broadband to a number of cities. Kansas City in 2011 became the first city chosen by the group to test its Google Fiber internet network, promising transmission speeds of 100 times that of current networks. Although Alphabet remains committed to Fiber, it put deployment on hold after the team made "important breakthroughs" with technologies seen as key to implementation of the super-fast internet service, Porat said. "We wanted to focus on the potential of these efforts before we reaccelerate deployment," she said. "It was about ensuring that we can take advantage of those (breakthroughs) before again pushing forth." Alphabet also announced that its board has authorized spending as much as $7 billion to repurchase outstanding shares of stock. The company's shares were up nearly a percent to $825 in after-market trades that followed the earnings figures release. "Alphabet's latest quarterly results were very good once again," Pivotal Research Group said in a note to investors. "Revenue growth trends seem pretty clear with Google reinforcing its co-hegemonic position alongside Facebook on an ongoing basis."
Baidu shares dip as quarterly revenue slips Revenue in the third quarter came to $2.7 billion (18.25 billion RMB), down a fraction of a percent from the same period the previous year, the company reported in New York, where it is listed. The fall came after the company was embroiled in scandal and lashed by Chinese media over the death of a student whose family used the search engine to seek a cancer cure that did not work. In May, Baidu was summoned by regulators and following a public outcry, the government announced stricter controls on internet advertising, while the company itself stepped up checks on clients. Starting in the third quarter, Baidu began requiring its customers to submit related internet licences and verified enterprise bank account information, Baidu's chief executive officer Robin Li said during a conference call. "We expect the most pronounced impact on our business in the fourth quarter followed by recovery early next year," Li said. "We remain highly confident in our long-term outlook." The firm said it expects fourth-quarter revenues to drop between 1.7 and 4.6 percent year-on-year. It admitted the customer verification work, which is expected to be finished by year end, will result in loss of customers as they "may be removed from doing business with us" due to the new restrictions. Chief financial officer Jennifer Li said it was "a very special period" and "not time to talk about year-on-year growth yet". "Basically Q4 is what we anticipate to be kind of the bottom," she added. Although revenues were down, profit for the quarter ending September 30 was up 9.2 percent to $465 million (3.1 billion RMB) year-on-year, according to the earnings report. The rise was driven by the firm slashing marketing and administration costs by 36.9 percent compared to the same period last year. The growing popularity of a Baidu news feed provided a bright spot during the quarter, the release said. The portion of Baidu's revenue coming from mobile device users rose to 64 percent in the quarter, from 54 percent during the same period last year, the company said. Baidu shares were down more than two percent to $171.40 in after-market trades following the earnings figures release.
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