2015 has proven to be something of a formulative year for Google, having become a part of Alphabet and witnessing the Stagefright security stories over the summer, which has resulted in a rethink of the Android update situation. More recently, the business also released two Nexus smartphones and is preparing a Pixel-branded Android tablet, the Pixel C; the business could be working on replacing the Nexus brand with the Pixel brand. Against this backdrop, we have seen an evolution of the business: Google is maturing. Earlier in the year we covered how Google was reining in expense as it went through a transitory period under the stewardship of a new Chief Financial Officer, Ruth Porat, who joined in the spring. There are signs that the business is becoming more inward looking, including how the hiring of new employees has slowed down. Another sign is that the business has spent significantly less on acquisitions in 2015, compared to what it has over the last six years.
Google has over $70 billion in cash or near-cash investments and has traditionally been somewhat trigger happy with acquisitions. In the first nine months of the year, the business has spent just $250 million on buying smaller companies and none of these transactions were significant enough for Google to need to disclose the details of the activity. For the first nine months of 2014, Google had spent $1.1 billion on unnamed businesses, $2.5 billion on Nest and around a billion between Dropcam and Skybox Imaging. Going further back, for 2013 Google spent $369 on non-named businesses and almost a billion on Waze. The first nine months of 2015 represent a stark difference compared with previous years, although a Google spokesman explained that the acquisition of other businesses is not linear and can be “inherently lumpy and don’t follow near nine month patterns.”
It’s too soon to understand what Google is doing. For instance, the slowdown could be Ruth Porat’s influence or it could be that the business is simply not finding many businesses worth investing in at the moment. Perhaps Google is busy digesting the businesses that it has bought over the last few years and integrating these new products into its portfolio? Of course, Google is also being transformed into the Alphabet holding company and perhaps the business is, essentially, distracted by what is going on under the skin? Of course, there is always the possibility that Google are to announce a major acquisition in the coming few months.