May 30, 2010

Google's Latest Launch: Its Own Trading Floor

The search giant is hiring Wall Street vets to manage a $26.5 billion pile of cash

 Last fall, some unusual job listings began cropping up on Google's (GOOG) website. Amid the requests for programmers and engineers were postings for bond traders and portfolio analysts. By spring, tech blogs were speculating about what was going on at Google.

The answer was very un-Silicon Valley. Google, it turns out, has launched a trading floor to manage its $26.5 billion in cash and short-term investments. The hoard is the third-biggest cash pile among U.S. tech companies, after Microsoft (MSFT) and Cisco's (CSCO).

One of the company's goals is to improve the returns on its money, which until now has been managed conservatively. Google doesn't disclose its rate of return on investments or the targets it has set, but analyst Aaron Kessler of ThinkEquity estimates the company's 2010 return (including interest income and realized and unrealized gains before tax) at around 2.5 percent. That's a higher return than some other large Internet outfits, such as Yahoo! and Amazon, he says.

Google is using some of its money to buy back shares in the wake of its $750 million acquisition of mobile advertising firm AdMob, which was an all-stock deal. The transaction was cleared by U.S. regulators on May 21. Investors have been wondering what else the company intends to do with its cash. IBM (IBM) recently announced plans to spend $20 billion over five years on acquisitions. Hewlett-Packard (HPQ) just bought Palm (PALM) for $1.2 billion. "Google could do 10 Palm kind of deals," says Michael Yoshikami, president and chief investment strategist of YCMNET Advisors, which owns Google shares. "That would be a pretty decent use of their money." Beyond the AdMob buybacks, Google has said it has no plans to return cash to shareholders.

Google's trading room opened in January. The plan is to keep the war chest growing safely and ready to be deployed should the right mergers-and-acquisitions opportunities arise. The investment team has grown to more than 30 people, up from six three years ago. Many of the new arrivals are former Wall Streeters who left lucrative careers at Goldman Sachs (GS), JPMorgan Chase (JPM), and other banks. The man in charge is Brent Callinicos, Google's 44-year-old treasurer, who joined from Microsoft in 2007, back when Google had $11 billion in cash. "This isn't fast money, this is patient money," he says. His crew works in a recently remodeled finance building on the company's corporate campus in Mountain View, Calif., complete with a rock climbing wall, massage chairs, murals of tropical sunsets, and bamboo wall panels. In a second-floor space accessed by key card—the trading room—the Wall Street vets tap out trades at desks with six computer screens.

Craig A. Jeffery, managing partner of Atlanta-based consultant Strategic Treasurer, says the financial technology at banks and most corporate treasuries tends to be an unwieldy hodgepodge of disparate software applications. If you're crunching numbers in Excel, you probably have to cut and paste the results manually into your foreign- exchange analytics software. Callinicos got around the coordination problem by tapping in-house engineers to meld the various pieces of software into one dashboard for trading and managing cash. "Callinicos built this mosaic of systems and a way of relating them together," says Jeffery.

That woven-together technology gives Google a trading advantage: It shows the value of the company's holdings all over the world in near-real time. This is harder than it sounds. Jeffery says that most treasuries with dozens of bank relationships in multiple countries can see the values of only 60 percent or 70 percent of their positions at any given time. Google's systems can monitor 98 percent of its holdings in real time, says Callinicos. "One of the toughest parts of [managing cash] is extracting the right data for the right decisions at the push of a button," says Wolfgang J. Koester, CEO of FiREapps, a maker of financial software. Callinicos "has been an industry leader on this."

Born in South Africa, Callinicos came to the U.S. at age 16. After receiving an MBA from the University of North Carolina, he landed in Microsoft's finance department in 1992 and became treasurer in 2000. By the time Microsoft's cash neared $60 billion in 2004—the year the company paid out a one-time $32 billion dividend—it was generating returns of more than 7 percent.

After a couple years of cautious cash management at Google, Callinicos says he's beginning to build a higher-risk, higher-return portfolio. Since last year he has pulled away from U.S. government notes and moved into corporate debt securities ($4.9 billion as of Mar. 31, up from $695 million the year before), agency residential mortgage-backed securities ($3.3 billion, up from $60 million), and foreign government bonds ($332 million, up from zero).

Google is still building its team. Its website lists openings for a foreign government bond trader, a risk analyst, and a portfolio analyst of agency mortgage-backed securities. Callinicos says he's looking for different qualities than those that large banks are seeking. "We're not trying to become a Wall Street firm," he says. "This is Google. It's eclectic." He cites Ranidu Lankage, who came to Google after a full-ride at Yale and a two-year stint at Lehman Brothers. When he's not analyzing Google's portfolio, Lankage is a star of Sri Lankan-style rap and R&B. He landed his first record deal with Sony (SNE) at age 19.

Callinicos wouldn't comment on what he pays his staff, though Gustavo G. Dolfino, senior managing director at financial recruiting firm Accretive Solutions, says Google pays finance staffers significantly less than what they would make on Wall Street. (Google has not retained Accretive Solutions.) He adds that what Google jobs lack in pay they make up for in stability. "Everybody knows that Google isn't going anywhere."

The bottom line: Google built a state-of-the-art cash-management system to improve returns. It may use that money on future deals.

Source: Bloomberg Businessweek

One Laptop Per Child is now a $75 Android Tablet

The first OLPC was an underpowered, 'designed-by-committee' laptop that cost at least double of what it was supposed to.  Most importantly, didn't adapt to the needs of the children who used it.  For instance, it didn't have a method for non-Latin characters to be input.  It was also made of plastic and had moving parts that would often break in rugged environments.
The new OLPC devices will take the lead from Apple's iPad but use Google's (GOOG) Android OS, at least initially.   The keyboard will be virtual and be able to adapt to different languages.

XO-3 will also have some specs that might appeal to a broader audience (myself included).  Quoting the WSJ (subscription req):
The new tablets will have at least one, and maybe two, video cameras. They'll sport Wi-Fi connections to the Internet, multi-touch screens and have enough power to play high-definition and 3-D video. Unlike Apple Inc.'s iPad tablet, the device will also work with plug-in peripherals such as mice and keyboards.
[I'm aware that iPhone's Touch OS doesn't need a mouse (and one's been hacked, anyway)  and Apple supplies both keyboard docks and Bluetooth Keyboards as well]
Negroponte said the new tablets will not use Microsoft's (MSFT) Windows 7 because the software requires too much memory and computing power.  That's been a common theme lately and might be a reason that HP (HP) picked up Palm.
Going tablet might be something he picked up from Apple (AAPL). Negroponte got advice from Apple's CEO Steve Jobs on the eve first OLPC launch:
"I got an email from Steve Jobs (the night the laptop was revealed) he said you can't build it for a hundred dollars, and my answer was oh yes I can," Negroponte said as part of a lecture at the University of Pennsylvania, Thursday night.
"He was actually a very good critic, and each time we got to a point, I did talk to him," Negroponte added. Negroponte also mentioned his displeasure with Microsoft, both in terms of Windows 7 performance, and Microsoft's attempts to thwart the OLPC initiative.
The device will be based on Marvell's Moby platform and will initially cost $99 for the hardware, but that price is expected to drop to $75 by 2011.  What does the Moby platform buy you?   According to Marvell, Moby is:
Powered by high-performance, highly scalable, and low-power Marvell® ARMADA™ 600 series of application processors, the Moby tablet features gigahertz-class processor speed, 1080p full-HD encode and decode, intelligent power management, power-efficient Wi-Fi/Bluetooth/FM/GPS connectivity, high performance 3D graphics capability and support for multiple software standards including full Adobe Flash, Android™ and Windows Mobile.  The ultra low power Moby tablet is designed for long-battery life.
XO-3 will come loaded with an application able to access two million free books available on the Internet, cutting down on the high costs of textbooks in the developing world.

Source: CNN Money

Image Credit: OLPC

May 22, 2010

Google Introduces Web Software for TV

Google found new way to generate revenue through their new software which enables web content on television to encourage viewers to use internet in their living room and view advertisements to generate revenue.

Google TV empowered with Intel Corp, Sony Corp and Logitech International.

The companies are trying to benefit from growing demand for Web-based programming and information on large screens, in more rooms of the house. Google, with the largest share of online advertising, wants a slice of the $175-billion TV-ad market. Intel aims to land its chips, already in about 80 percent of the world’s personal computers, into a wider range of electronics.

“Television is becoming the true third window, with the computer and the phone, allowing you to access what you want when you want it,” Eric Kim, who heads Intel’s digital home division, said in an interview. “The dumb tube is turning into an intelligent device, a smart TV.”

Google TV serves as an “entertainment hub” that lets viewers search channels, recorded shows and web sites, Google said in a video on its YouTube entertainment site.

The company isn’t currently selling ads specifically designed for the new platform, said Rishi Chandra, a product manager at Google. Users could see Google’s ads as they browse web sites when accessing the Internet on the new TV service.

“We want to get the product experience right first,” Chandra said. “Over time, there will be opportunities to really rethink how ads can actually work better on this TV experience.”

The service will include video-on-demand products from Inc., Netflix Inc. and Hulu, a video site partly owned by Walt Disney Co., Google said at the conference.

“There is still no better medium to reach a wider and broader audience than the television,” Rishi said during the company’s developers’ conference in San Francisco. “Video should be consumed on the biggest and brightest screen in the house.”

Google has adapted a version of its Android software and Chrome Internet browser to display television programming from cable and satellite sources and video from the Web. Applications that have been written for existing versions of Android, used in mobile phones, will now work on television screens.
Bloomberg News

May 18, 2010

Google TV

Google Inc. will make an ambitious bid to extend its reach into the living room when it debuts its Internet television software this week. Through a joint initiative with other prominent technology and consumer electronics companies, the Web search giant is expected to showcase technology that TV viewers can use to flip seamlessly among familiar shows, YouTube videos and home videos on their sets.

Google and partners Sony Corp, Intel Corp. and Logitech International will unveil the new television platform at a conference in San Francisco for 3,000 software programmers in hopes of generating a flurry of independent development.

Google isn't the first online company to make a grab for the TV. At the Consumer Electronics Show in Las Vegas this year, manufacturers displayed a plethora of televisions, Blu-ray players and set-top boxes with Internet services, including online photo delivery, music streaming, news reports, weather forecasts and stock quotes.

Source: "LA Times"

May 13, 2010

Google integrates eSpeak in Google Translate

Google has integrated eSpeak, an open source software speech synthesizer for English and other languages, in its online translation service Google Translate. The move will allow users of Google Translate to hear translations spoken out loud ('text-to-speech') by clicking the speaker icon beside some translations.

According to Google, the company had earlier developed its own technology for the purpose and rolled this feature out for English and Haitian Creole translations a few months ago and added French, Italian, German, Hindi and Spanish a couple of weeks ago. “Now we’re bringing text-to-speech to even more languages with the open source speech synthesizer, eSpeak,” Fergus Henderson, a software engineer at Google, has said.

“By integrating eSpeak we are adding text-to-speech functionality for Afrikaans, Albanian, Catalan, Chinese (Mandarin), Croatian, Czech, Danish, Dutch, Finnish, Greek, Hungarian, Icelandic, Indonesian, Latvian, Macedonian, Norwegian, Polish, Portuguese, Romanian, Russian, Serbian, Slovak, Swahili, Swedish, Turkish, Vietnamese and Welsh,” Fergus Henderson has added

Source: AlooTechie