Google’s Capital Spending Liable To IncreaseBy: Doug Caverly - June 25, 2009
It can be quite good for a person’s budget to occasionally substitute some ramen for a steak dinner. That said, a person’s apt to experience problems if he eats ramen all the time, and Google seems to have run into a similar issue as an analyst believes the company will have to increase its capital spending.
As reported by Joseph Tartakoff, Jeffrey Lindsay of Bernstein Research found that "Google spent $263 million on capital expenditures in the first quarter of the year, down from $842 million a year ago." Which is an extremely impressive decrease on the order of 69 percent.
However, Google was able to give itself this break in part by putting off the construction of two data centers, and the search giant cut back on new hires, too. Which, given its continued popularity (and indeed, growth), seems like less than sustainable behavior.
So Tartakoff added, "Lindsay expects capital expenditures to jump to $2 billion in 2010 from $1.4 billion this year, and has lowered his earnings per share forecast slightly for next year."
This shouldn’t amount to doomsday for Google – the search giant’s supposed to have plenty of money coming in (and indeed, the recession may have officially ended at that point). It’s perhaps just a detail that fans and shareholders should keep an eye on.