Google Growing??...At What Risk??

Google announced their earnings today and here is what the CEO had to say about 2005:

"We are very pleased with our results for the fourth quarter as we achieved excellent performance across our businesses," said Eric Schmidt, CEO of Google. "We generated significant revenue growth in our core search and advertising business, driven by continued strength in traffic and monetization. We will continue to invest significantly as we develop innovative new products and as we extend our core technologies to new user access points and to different channels."

Just prior to their earnings today I was fortunate to read about some of the company's strategies for growth and how the Wall Street analysts come up with their estimates. Here is a brief analysis I prepared of two articles about both issues. Have business ethics rules been forgotten? You be the judge.

The financial decision making process for an organization can get quite complicated at times. There are many different variables that managers must take into account and their decisions affect a great deal of stakeholders/stockholders in the organization. One major variable that managers must take into account are the ethical impacts of their actions. Presently Google struggles with ethical issues and how to satisfy stakeholders. In today’s print of Financial Times (01/30/06) two articles, “Google is putting its own freedoms at risk in China”, and “Google set to test forecasts’ accuracy again”, additional insight can be gained on the ethical dilemmas Google is facing.

John Gapper’s commentary regarding Google’s, expansion strategy into China provides a interesting view of what length top level executives will reach to increase their market share and profits. Google is providing a “censored” Google service in China in an effort to maximize their profits. Due to the restrain on by the government in China Google feels that by providing a speedy Google it is okay to censor their search services. Google’s financial objective is to maximize their profit and possibly do it by providing an inferior product knowingly? Google calls this the lesser of two evils due to the environment, ironically one of Google’s founding principles is “Don’t be Evil.” This is a rather unique way of making a capital budgeting decision.

Google’s capital structure and investment issues can be examined in Richard Water’s article regarding their stock price and the earnings report that will be presented tomorrow. Google’s earnings have been beating the “street” estimates by 6-15% each quarter. However, these estimates are from analysts that are known for understating popular stocks. Analysts are already speculating that the earnings report will beat their estimates and this speculation can affect the stock and derivatives markets. By providing these low estimates analysts feel they are being “cautiously aggressive” with their approach with one analyst saying they don’t want to be too aggressive ….predicting that they will outperform. This stage is similar to what was seen in during the dotcom boom of the 90’s when analyst’s unethical estimates cause many individuals to loose their nest eggs.

Google and many companies like them have a great deal of ethical decisions to consider when making decisions that affect many. One the one hand should they provide an inferior product just to make a quick buck. Should the “street” analysts give understated numbers in an effort to “prop” up a stock? In the financial world we live in today, the answer is yes.


References:

Gapper, John. (2006, January 30). Google is putting its own freedoms at risk in China. Financial Times, pp.15.

Waters, Richard. (2006, January 30). Google set to test forecasts’ accuracy again. Financial Times, pp.18.

Brian N. Stovall
Consultant - Accounting & Business Advisory
The Brico Group, Inc.
bstovall@thebricogroup.com

Corporative Housing Corporations and Tax Tip

If you are an owner/stockholder of a cooperative housing corporation, you own shares of stock in a corporation that leases or owns housing facilities. Typically you can deduct your share of the corporation’s deductible real estate taxes just like a standard home owner. To qualify as a cooperative housing corporation, the business must meet the following conditions:

There is only one class of outstanding stock for the business
Each stockholder, solely because of ownership of stock can live in the dwelling owned by the corporation
No stockholder can receive any distribution out of capital, except when the corporation is partially or completely liquidated
Tenant-stockholders pay at least 80% of the corporation’s gross income for the tax year (income received during the entire year even if the corporation was not a cooperative housing corporation for the whole year)

To figure your share of real estate taxes (1) divide the number of shares of stock by the total outstanding (including shares owned by the corporation). (2) Then multiply the corporation’s deductible real estate taxes by the number you figured in one.

If the corporation received a refund of real estate taxes paid in a prior year, it must reduce the amount of real estate taxes paid this year when it allocates the taxes to each stockholder. Your deduction for real estate taxes paid this year will be reduced by your share of the refund the corporation received. For more information see IRS Publication 530.

Brian N. Stovall
Consultant - Accounting & Business Advisory
The Brico Group, Inc.
bstovall@thebricogroup.com
www.thebricogroup.com

Mid-Range Accounting Software for Your Growing Business

Alas 2006 is upon us! Time for your businesses to spring out of the blocks with your best foot forward and turn those creative ideas into new product and/or service offerings. The New Year brings about a time of change for the small business owner and this may be a good time to see if you are getting the most out of your small business accounting software investments. Your accounting software plays an integral role in your profitability and in the growth of your business as a whole. This is why it may be a good time to see if you have outgrown your small business software and need to move to the next level – “Mid Range Accounting” software.

Entry level packages provide the small business owner with all the necessary tools they may need to track expenses and invoice clients. They also give the small business owner insightful reports to make business decisions. These systems are good for small business owners that typically enter the data themselves or have a part-time bookkeeper to assist them. However what if your small business has recently experienced unprecedented growth and there is more information to enter. The small business owner may need to hire additional staff and the number of transactions within your existing small business software may be too much for the software to handle. This is where mid-range accounting software may make your operations more efficient.

Mid-range accounting software is typically for small businesses that have 25 or more users that need simultaneous access to financial information. It also provides the small business owner with more detailed analysis features, dashboard snapshots, and continuous updates as changes are made within the system. Most mid-range accounting systems are “modular” in nature meaning that they are purchased in parts or modules. The most basic modular system typically includes a company manager, general ledger, accounts payable, account receivable, and payroll. The more robust modules will include inventory tracking, CRM, and web capability. Mid-range accounting software does not require a total technology overhaul either. Many software packages can be run on your existing client/server configurations and this will definitely be a relief to your IT department or IT consultant.

Take a look at the following options if you are in the market for a mid-range accounting software platform:

Cougar Mountain Accounting 10
www.cougarmtn.com

Quickbooks Enterprise Solutions 6.0
www.quickbooks.com

Turning Point 4.0
www.redwingsoftware.com

Sage Business Vision V. 7 & Sage BusinessWorks 6
www.sagebusinessvision.com www.sagesoftware.com

To Your Prosperity

Brian N. Stovall
Consultant – Accounting & Business Advisory
The Brico Group, Inc.
bstovall@thebricogroup.com
www.thebricogroup.com

Windows One Care Live...Beta

The software giant Microsoft is at it again. They are starting off the new year with more goodies for us techies. Some are truly useful and some are bad for small business owners. I am going to evaluate Windows One Care in today's blog.

First of all what is One Care Live? The folks at Microsoft describe One Care as this:
"Windows OneCare is a comprehensive PC health service that goes beyond security to take an integrated approach to help protect and care for your computer." Bascially, its a complete pc protection program. Its a pretty novel idea. Most companies focus in on providing security for your computer. Some focus on the diagnostics of your pc. With OneCare Live they deliver the whole package all in one.

Hmmm...sounds pretty interesting. Opps did I forget to mention that this software is in beta right now. With that in mind one would expect some flaws. I downloaded and installed the beta on my machine a couple of weeks back. The install process was fairly simple. Just following the steps in the setup wizard is all that is necessary. After install the software loads.
Once in the software you can adjust the anti-virus settings, firewall settings and additional security features. It also provides you the ability to "tune-up" your pc. You also have the ability to backup your files (serves as a backup program also).

Those are some pretty good features in a one-stop software suite. Of course the features are more detailed but for this blog's purposes I just wanted to highlight them. After I setup all my One Care settings I powered my machine off. The next day and subsequent day thereafter I noticed "slowness" in my browser. Pages that would normally take a second to load would now take over 30 seconds to a minute. Frustrating. Another frustrating thing is that you have to use Internet Explorer 6.0 as your default browser. At the time Firefox was my default browser. One Care had major problems trying to access the internet for updates via Firefox. Frustrating once again.

Now I am a patient guy but after 4 days of being frustrated I said enough. Yes I uninstalled Windows One Care beta. During uninstallation I filled out a survey from Microsoft. I basically told them my frustrations with using the product...I truly hope they listen. The good things about all this is that again this software is in beta so they have time to get all the bugs out before the final release. Truth be told all the features of One Care live can be peformed via the control panel. However, the key concept of One Care is to perform those actions for 1)people who do not know how to do them or 2)for people who do not have time to do them.
I'm not giving up on One Care totally. The final version should be released sometime this winter. I'll check it out again then and see if my frustrations will continue.

Brian J. Winston
Consultant - Sofware & Web Development Services
The Brico Group, Inc.
bwinston@thebricogroup.com