) is a multinational technology company generally specializing in Internet related services and products. Google’s stock price increased as reported earnings exceeded expectations due to better expense controls and accelerated revenue growth in Google’s core search businesses, where mobile search and YouTube showed particular strength. Furthermore, CFO Ruth Porat provided some hope of returning some of Google’s excess cash to shareholders. While we remain unconvinced that controlling shareholders Brin and Paige will return cash to shareholders as Porat’s comments suggest, we would welcome it as it would provide additional upside to our base case valuation. In addition, the stock price was also helped by the announcement of the creation of a holding company called Alphabet, implemented on Oct. 2, which will consist of several subsidiaries the largest of which will be the Google Internet Services (search, apps, android, YouTube etc.). Alphabet will hold several other companies that used to sit inside Google which represent longer term initiatives not directly related to Internet Services such as Nest, Calico Healthcare and Google Fiber. We believe this is a positive move as it may entail further disclosures of both the highly profitable Google Internet Services business and the company’s other venture investments.
From Wallace Weitz
)'s Partners Value Fund commentary for third quarter 2015. Continue Reading »