Is Google About to Go on a $30B Overseas Shopping Spree?
Search-giant Google (NASDAQ:GOOG)(NASDAQ:GOOGL) may have tipped its hand a bit in a letter to regulators, indicating it plans to keep up to $30 billion in cash overseas as a means to expand its ability to acquire foreign companies. It’s been no secret that Google, along with other tech giants like Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT), regularly takes advantage of tax loopholes by stashing profits in foreign countries, but the company is claiming it will put those assets to use, specifically by consuming foreign businesses to expand its reach.
According to Bloomberg, in a letter to regulators from last December, the company says it plans to put a lot of that money to work. “We continue to expect substantial use of our offshore earnings for acquisitions as our global business has expanded into other product offerings like mobile devices,” Google’s letter said. “It is reasonable to forecast that Google needs between $20 to $30 billion of foreign earnings to fund potential acquisitions of foreign targets and foreign technology rights from U.S. targets in 2013 and beyond.”
Google’s Quarterly Earnings Summary plainly displays that roughly half of the company’s revenues are generated overseas, and that number is increasing. If Google really plans to go on a spending spree overseas, a spree of up to $30 billion nonetheless, that’s a big signal as to where the company sees its future. As technology cascades down from American markets and into Europe, Latin America and Asia, there is a lot of room for growth around the globe.
You wouldn’t be blamed for a sense of doubt that creeps over upon hearing of Google’s plans to buy up foreign firms, as it’s easy to think the company will likely just hang on to the cash instead of going through the costly process of repatriating it. Big business has a long history of tax avoidance, with armies of policy analysts and accounts tracking down every loophole available to keep their employers from ponying up cash to the government. This is what has turned places like Ireland and the Cayman Islands into tax havens, with accounts overflowing with profits businesses would rather not admit to possessing. As regulators and the public have become more aware of these avoidance tactics, there have been calls for big businesses to play fair and pay their share. In the case of Google, its board of directors decided that it wouldn’t be the best course of action. This can have some negative public backlash, but as an overall factor in corporate strategy, it’s nothing out of the ordinary, as businesses tend to look out for their stockholders’ interests.
Instead, Google has aimed its cross-hairs at international companies for acquisition. Last year, Google purchased Israel-based Waze for$1.1 billion, its largest international acquisition to date. The purchase was meant to give Google’s social networking abilities a boost, and could be a preview of what’s to come over coming years. Over the past decade, the company has heavily diversified its business offerings, becoming much more than a simple search engine. With so many alleyways to generate revenue, tech startups from all across the spectrum — and world — are now open game to become folded into Google’s empire.
As Google expands into self-driving cars, wearable technology and robotics, it’s easy to see how all of these new advances can be applied internationally, as well as at home in the U.S. Robotics itself can appeal to militaries and science organizations around the world, and self-driving cars appears to be primed to be the next big thing in the automotive world. Can you imagine the dense, narrow streets of many European cities suddenly moving much more efficiently thanks to cars with out drivers? Perhaps a prime target on Google’s acquisition list could be a London taxi company? Or an Asian textiles company to help boost interest and sales in new contact lenses?
Perhaps this is a shifting point for Google overall? As it has grown to one of the largest and most powerful corporations on the planet, shareholders are going to want to see sustained growth every quarter, and it’s not hard to imagine calls from investors to focus on generating revenue — and less on research and development. Could Google simply become a machine that rolls through different countries, gobbling up tech startups and businesses into an amalgamate so far-reaching no one on Earth can hide? While that’s taking things a little far, such is the nature of the corporate mindset.
A simple letter to regulators indicating Google’s desire to keep cash overseas for future acquisitions does not indicate the birth of Skynet, or an awaiting Orwellian future under the company’s rule. But it show signs that the company may be looking to shift course. As Google already is bringing in monstrous profits from foreign markets, maybe it makes perfect sense that it would be looking to invest further outside of the U.S. Of course, it also gets the luxury of dodging taxes on that income as well, without the burdensome repatriation process to dwindle its stash. What exactly does Google have in store for foreign markets and startups in coming years? With $30 billion waiting in the wings, investors can be assured that it’s something big.