Despite being enormously profitable, Google’s parent company Alphabet’s expenditures on experimental projects has started to balloon. It's got so bad, that the company just said it intends to make sure all that spending makes sense.
In its just released financial statements for the first quarter of 2016, the company once again split-up its numbers into two categories: Google, which is its core business web business, and “other bets,” like its life sciences business Verily, Google X, and the self-driving cars project. The cost of Alphabet’s “other bets” has gone up year-over-year to $802 million from $633 million during the same period of 2015. Alphabet’s spending problem is part of an ongoing problem at the company to legitimise many of its sexier (albeit less profitable) projects.
“We’re thoughtfully pursuing big bets,” Alphabet CFO Ruth Porat said during Thursday’s earnings call. She added that the company is trying to rationalise its portfolio of products. Here’s the quote:
“In certain areas, where we’ve had multiple teams developing different approaches to a similar technology, we’ve been evaluating how to rationalise these approaches, enabling us to increase investments around a smaller, more focused set of opportunities.”
Now that’s a lot of very opaque business babble, but the comments about rationalizing the company’s portfolio of products come in the wake of several reports indicating some shifting priorities within the company. Last month, Bloomberg reported that the company’s crazy robotics lab Boston Dynamics is being sold. Although Boston Dynamics was great at producing creepy GIFs of people bullying robots, it ultimately doesn’t have a realistic timeline for when it might make Alphabet some cash.
In addition to putting Boston Dynamics up for sale, reports have been surfacing that there are problems at Nest, Alphabet’s smart home division. In several reports published last month, internal clashes were cited within Nest and Google.
Porat didn’t explain exactly how Google intends to “rationalise” its lofty projects, but it’s possible we’ll get some news at Google I/O next month.