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Google Financial Management

Essay by   •  December 16, 2012  •  Case Study  •  1,845 Words (8 Pages)  •  1,404 Views

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Financial Management

Google is an internet and software corporation that specialized in internet search, cloud computing, and advertising technology, that began in January 1996 by founders Larry Page and Sergey (www.Google.com 2011). Microsoft is software corporation that was established in 1975 by Bill Gates and Paul Allen, and develops, manufactures, licenses, and support products and services related to computers (www.Microsoft.com 2012) . This paper will discuss Google and Microsoft core business, leading products and services, management and leadership style, and innovation track records. This paper will also discuss if either Google or Microsoft will be able to withstand a major recession, as well as explain both Google and Microsoft performance and investing decision. Lastly, this paper will identify three primary financial-based guidelines that should be used when selecting either Google or Microsoft to invest in.

Google and Microsoft business model

Google is a well-known company, known for its simplicity in searching the internet. This company started with some money from investors and became one of the best sites on the internet because of the "dotcom" boom. Google is used to research anything that has website or an image and it has recently expanded to Google earth and its own email. Google also offers the simple search engine as well as iGoogle Games, Mobile Google, and Google Music. Google core business is search, ads and apps. "Search is there core technology; ads is there central business proposition; and apps are the umbrella over there web-based software that can access anywhere and at any time (www.Google.com 2011).

Google's management techniques have proven to be successful. One of their "10 Golden Rules" -Google's compilation of ten rules which help motivate their employees - is place employee's in the same or even different departments in close quarters to allow them to communicate, which in turn, makes coordination extremely efficient (www.Google.com 2011). Google runs a unique and exceptional work atmosphere, from its constant technological advances to its friendly work environment.

Microsoft is the one of the most successful and influential software company. Microsoft's software and Intel's hardware pioneered the PC and revolutionized the computer industry. Microsoft Windows operating systems is the most popular and is standards on mostly all desktop and is a major contender in the server arena. Another operation system that Microsoft has is MS-DOS. Microsoft Office also has the most successful application suite in history, along with Microsoft Office Suites. The company also has a thriving business in programming languages, which are its roots, as well as in numerous other software categories. And when it comes to the internet, Microsoft as Bing Bar, Internet Explorer, Microsoft Messenger for Mac, Microsoft Silverlight, and Windows Live Essentials.

Google doesn't have a good innovation track record. After several attempts at structuring their development process, Google has arrived at the 70-20-10 rule.

Eric Schmid outlines their current process as follows:

1. 70-20-10 Principle: By the most recent analysis, Google is not as high as 70% in the core of search/ads, so now they're reshifting the focus again to adjust (in other words, we're doing more search again...).

The 20% represents Google's bargain with technical people, allowing them to roam free to encourage creativity---where all the most interesting products emerge.

The 10% is for wacky ideas that might not work out but feel worth pursuing.

2. An "exhaustive drama of arguments and reviews" in "ceaseless GPS [Google Product Strategy] reviews---so much that it's produced a recent internal traffic jam on the servers with so many such teams."

3. A monthly formal revenue force and reordering around product investment.

"The goal is to systematize anything...The only way to deal with the growth in scale, is a systematic approach to each and everything we do...Google's making significant storage/computing capacity investments, reusing and combing data from one application to another...."

(www.Google.com 2011)

Microsoft management style is based on beliefs. Microsoft founder, Bill Gates wanted to create a healthy, productive work environment that maintained its employees values and commitment of excellence. In building a corporation based on the principles of diversity and respect of one another's individuality, Bill wanted to bring in the right people to manage his corporation that had the same common goals to achieve the main goal of having a thriving corporation (www.Microsoft.com 2012).

Microsoft also has an innovation track record. In the last couple of years Microsoft expand advertising capabilities into two key Windows Live for mobile services. These were called Windows Live Messenger and Windows Live Hotmail, which are uses to help connect with consumers on the go. In addition Microsoft also announcing a new smart shopping cart, which would allow shoppers to scan their loyalty cards to receive special discounts and ads.

Google financial ratio analysis and recession

Based on the financial ratio analysis listed in listed in Appendix A for Google and Appendix B for Microsoft, the company to withstand a major recession is Google. With the least debt ratio as compared to Microsoft and the highest current ratio, if a recession was to come Google would be idea to overcome. One area that Google would cut in the misted of a recession would be there temporary and contracts employees, and still keep their full-time and pat-time employees. The reason Google will choose this route is because a company can fall under the mutual fund regulations once its investments exceed 40 percent of its assets.

Also Google's investment securities represented 28 per cent of its assets as of Sept. 30, but the company believes it could surpass the 40 percent threshold if it ventures into more lucrative options such as municipal bonds (www.smh.com 2008). Although the company's revenue is still rising, Google's growth can decelerate. A recession can caused consumers to shop less frequently on the Internet and advertisers can trimmed their marketing budgets. Those factors can slow the money flowing to Google because online ads generate virtually all the company's revenue.

Google and Microsoft profitability ratios, performance, and investing decisions.

The profitability ratios

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