In August 2015, we announced plans to create
Alphabet, a new public holding company, in which we would run our newer initiatives
separately from the main, internet-related businesses within Google. We expect the new
Alphabet structure to bring increased focus, accountability and transparency to all of
our efforts. Since the announcement, we’ve been hard at work making the internal
changes needed to make Alphabet a reality and to implement the related segment
reporting starting with our fourth quarter 2015 results.
In order to help you understand the financial results for the fourth quarter of 2015
that we’ll report on February 1, we wanted to
share some information in advance.
Two Reported Segments: Google and Other Bets. As we discussed on our
Q3 earnings call, we’ll be adding disclosures for our segments. First, we will disclose
our new ‘Google’ segment which includes our main internet products such as Search, Ads,
Commerce, Maps, YouTube, Apps, Cloud, Android, Chrome, Google Play as well as hardware
products we sell, such as Chromecast, Chromebooks and Nexus. Our technical
infrastructure and newer efforts like Virtual Reality also remain in Google.
Second, our other businesses will be combined and disclosed as ‘Other Bets’, which
includes Access/Google Fiber, Calico, Nest, Verily (formerly Google Life Sciences), GV
(formerly Google Ventures), Google Capital, X (formerly Google [X]) and other
initiatives.
No changes to consolidated reporting, some changes in revenue
breakout. Nothing is being taken away from our consolidated reporting. We will
continue to show Google advertising revenues and TAC broken out by Sites and Network
and we will continue to share monetization metrics (click and CPC growth) in aggregate
as well as separately for Sites and Network.
In our historical results, revenues from Other Bets were included in “Other Revenues.”
With segment reporting, Other Revenues will now be reported only for the Google segment
as “Google Other Revenues.” Other Bets revenue will now be reported in the Other Bets
segment. We’ve provided more information below on where you’ll see this information.
Six key financial disclosures for each segment. For each of Google and
Other Bets, we’ll be reporting:
Revenues
Segment operating income / (loss), excluding stock-based compensation expense
Stock-based compensation
Segment operating income / (loss)
Capital expenditures
Depreciation, amortization and impairments
Quarterly data for current year, prior year comparable period and annual
information for 3 full years. To ensure that you have a basis for comparison,
in addition to current period, we will also provide historical segment information for
all quarters of 2015, the fourth quarter of 2014 and full years 2013, 2014, and 2015 in
our upcoming earnings release.
Visual presentation. You can expect the presentation of segment
results to look something like this for each period included in our upcoming earnings
release:
In addition, we will provide our revenue breakout for each period in the press release
as follows:
Reconciling items. You’ll see from the above that segment revenues are
fairly straightforward. The revenues from the Google segment plus the revenues from
Other Bets will equal the total consolidated revenues.
For our other segment disclosures we will include “reconciling items” to help you see
how the amounts reported for Google and Other Bets relate to the consolidated number
for Alphabet as a whole in our income or cash flow statements.
For segment operating income / (loss) and stock-based compensation expense (‘SBC’)
the reconciling items will primarily relate to corporate administrative costs and other
miscellaneous items that are not allocated to individual segments.
For capital expenditures, the reconciling items primarily relate to timing
differences of payments, as segment capital expenditures are presented on an accrual
basis whereas capital expenditures in Alphabet’s Consolidated Statements of Cash Flow
are on a cash basis.
In addition, reconciliations can also include other miscellaneous items, for
example, items relating to Motorola for fiscal 2013 and 2014, as applicable.
Separately, please note that return on investments from our ventures and capital
businesses are included in OI&E (Other income and expense, net), which we will
continue to disclose at a consolidated level.
We hope this helps set the stage for our new disclosures on Monday, February 1.
Posted by Amie Thuener, Chief Accountant
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