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Financial reporting: the alphabet soup

Posted by Mark Fuchs, Chief Accountant Warning: Financial reporting minutiae below. Proceed with caution. We're going to provide a bit more information with our October 20 <a href="http://investor.google.com/webcast.html">earnings announcement</a>. In this and future announcements, we're going to include a so-called pro-forma, or non-GAAP, diluted <a href="http://www.americancentury.com/servlet/GlossaryManager/acb.americancentury.com/ilEEd.htm#EarningsPerShare">earnings per share (EPS)</a> number as a supplement to our <a href="http://www.aicpa.org/members/glossary/g.htm">GAAP</a> EPS number. In the past, we've only provided GAAP EPS. But because Wall Street analysts typically estimate and describe our results with non-GAAP EPS numbers, that resulted in some confusing apples-to-oranges analyses of our results. (By the way, we review non-GAAP results when we analyze our own performance.) By providing both, we hope it will be easier to understand our results. Now, if you’ve got your green eyeshade handy, read on. What follows is in accountant-speak. Earnings per share is calculated by dividing profit (net income) by the number of outstanding shares. That's GAAP. To compute our non-GAAP EPS, we’ll add back to our net income things such as charges for stock-based compensation. (Before adding back stock-based compensation – or other certain charges – we’ll factor in related taxes. What does that mean? When we add back a charge, we subtract the tax benefit related to it that we would get under GAAP accounting. In other words, in the non-GAAP calculation we don't want to include the GAAP tax benefit.) After tax-affecting the charges and then adding them back to net income, we'll take that sum, divide it by outstanding shares and come up with our non-GAAP EPS number. To illustrate all of this with a fictitious example, let's assume these imaginary data points: <ul> <li>GAAP net income - $300 million</li> <li>Stock-based compensation charge - $100 million (note that other charges in addition to stock-based compensation may be excluded from the computation and presentation of our non-GAAP results as appropriate in the future)</li> <li>Tax affect of stock based compensation charge - $35 million</li> <li>Shares outstanding for Google - 600 million</li> </ul> To get our GAAP EPS, we would simply divide $300 million GAAP net income by the 600 million shares outstanding and arrive at a GAAP EPS of $0.50. <blockquote>$300,000,000 / 600,000,000 = $0.50</blockquote>Now, to get the non-GAAP EPS, we would: <ol> <li>Subtract the $35 million tax affect from the $100 million stock-based compensation charge to arrive at $65 million</li> <li>Add that $65 million to the $300 million GAAP net income for a new, non-GAAP net income of $365 million</li> <li>Divide $365 million by 600 million shares outstanding and get a non-GAAP EPS of $0.61.</li> </ol> <blockquote>($300,000,000 + ($100,000,000 - $35,000,000)) / 600,000,000 = $0.61</blockquote>As if this weren't complicated enough, we should note that most, if not all, analysts have historically computed our non-GAAP earnings by adding stock-based compensation to net income without tax-affecting the charge. As a result, when we provide our non-GAAP EPS number, we may be adding back less to compute our non-GAAP earnings than will most of the analysts. Using the same set of imaginary numbers, analysts might, for example: <ol> <li>Add the full $100 million stock-based compensation charge to the GAAP net income of $300 million and arrive at their non-GAAP net income of $400 million</li> <li>Divide that by outstanding shares and arrive at non-GAAP EPS (for the fictitious example, $0.67 per share)</li> </ol> <blockquote>($300,000,000 + $100,000,000) / 600,000,000 = $0.67</blockquote>Congratulations to those of you who were able to make it this far. We're sorry for the density, but this is dense stuff and we've got to be comprehensive in our explanation of it.

Financial reporting: the alphabet soup

Posted by Mark Fuchs, Chief Accountant Warning: Financial reporting minutiae below. Proceed with caution. We're going to provide a bit m...

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About Google.org

Posted by Sheryl Sandberg, VP, Global Online Sales & Operations When we told prospective shareholders about Google and <a href="http://www.sec.gov/Archives/edgar/data/1288776/000119312504142742/ds1a.htm">how we wanted to do business</a>, we said that we hoped our philanthropic efforts could some day have a greater impact than Google itself. We committed one percent of our profits and equity toward that vision. We’ve looked closely at how those resources can have the greatest impact and found that there are many creative and effective ways to make a difference. So we’ve taken time to investigate, learn and imagine. And while we are still actively engaged in the learning process, we’ve made enough progress that we thought it was a good time to give an update on our plans. As our founders said in our <a href="http://investor.google.com/pdf/2004_AnnualReport.pdf">2004 annual report</a>, we’re taking a broad approach. We’re calling the umbrella under which we’re putting all of these efforts <a href="http://www.google.org/">Google.org</a>. It will include the work of the Google Foundation, some of Google’s own projects, as well as partnerships and contributions to for-profit and non-profit entities. Here are some things we're already working on: We established the Google Foundation, funded it with $90 million and have made a few initial commitments. We've contributed $5 million to support <a href="http://www.acumenfund.org/">Acumen Fund</a>, a non-profit venture fund that invests in market-based solutions to global poverty. Acumen Fund supports entrepreneurial approaches to delivering affordable goods and services for the 4 billion people in the world who live on less than $4 a day. We’re also working with <a href="http://www.technoserve.org/">TechnoServe</a> to build small businesses that create jobs and promote economic growth in the developing world. With TechnoServe, we are funding an entrepreneurship development program in Ghana that includes a business plan competition and seed capital for the winners to build their businesses. In addition, we are working with Alix Zwane and Edward Miguel of UC Berkeley and Michael Kremer of Harvard University to support research in western Kenya to identify ways to prevent child deaths caused by poor water quality. Google.org also includes projects we manage on our own, using Google talent, technology and other resources. An example is the <a href="http://www.google.com/grants/" title="http://www.google.com/grants/">Google Grants</a> program, which gives free advertising to selected nonprofits. To date, Google Grants has donated $33 million in advertising to more than 850 nonprofit organizations in 10 countries. Current Google Grants participants include: <a href="http://www.wish.org/?gg">Make-a-Wish Foundation</a> - grants the wishes of children with life-threatening medical conditions. More than 25 percent of their online donations are made as a result of their Google ads. <a href="http://www.doctorswithoutborders.org/?gg">Doctors Without Borders</a> - delivers emergency medical aid to people affected by armed conflict, epidemics, disasters, and exclusion from health care in nearly 70 countries. Google Grants has assisted them with recruiting experienced doctors and nurses for their field programs, which has helped them increase applications by 30 percent this year. <a href="http://www.gfusa.org/?gg">Grameen Foundation USA</a> - uses microfinance and innovative technology to help the world's poorest people escape poverty. Google Grants has helped them attract donors and broaden their newsletter subscriber base. With Google.org, we’ll also support entities with strong social missions which use market-based solutions for sustainable economic development. One example is our recent donation of $2 million to the <a href="http://laptop.media.mit.edu/">One Laptop Per Child</a> program. While the results we get are more important than the amount of money we give, we want to be clear about how we’re going to keep our “one percent” commitments. There are two parts: equity and profit. For the one percent of equity, we have committed one percent of the outstanding shares that resulted from our initial public offering – 3 million shares. We’re going to donate and invest this amount over a period of as much as 20 years. Because it is based on stock, the dollar value of this commitment will rise and fall with our stock price We’ll follow through on the other commitment – one percent of profit – by taking one percent of each year’s profits and donating and investing that too. Our first step in meeting these commitments includes a $90 million cash donation to the Google Foundation and a commitment of up to $175 million over three years across our other Google.org efforts. We don’t expect to make further donations to the Foundation for the foreseeable future. As Larry and Sergey said in their Founders’ Letter, “We hope someday this institution may eclipse Google itself in terms of overall world impact by ambitiously applying innovation and significant resources to the world's problems." We feel fortunate to have the opportunity to contribute our resources, talent, energy, and passion helping to solve some of the world’s most pressing problems. We will provide you with updates as our work progresses.

About Google.org

Posted by Sheryl Sandberg, VP, Global Online Sales & Operations When we told prospective shareholders about Google and how we wanted to ...

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Bird flu basics

Posted by Taraneh Razavi, M.D., Staff Doctor As flu season approaches, there's been a lot of talk about bird flu. I thought I'd try to clarify some of the issues and misconceptions around this illness. I keep up with news on this and other emerging diseases in a number of ways, including <a href="http://fas.org/promed/">Pro-MED</a>, which is produced by the Federation of American Scientists, and the <a href="http://www.who.int/csr/disease/avian_influenza/en/">World Health Organization</a> site. You can also read lots more at the CDC site, especially <a href="http://www.cdc.gov/flu/avian/gen-info/avian-flu-humans.htm">here</a>. Bird (avian) flu is an influenza virus type A that normally infects birds, but can also infect pigs and other animals. Wild birds, the natural hosts, normally don't get sick from this virus, but domestic animals such as chickens and turkeys can be severely affected severely. Humans, meanwhile, can be infected with influenza types A, B, and C. Genetic changes and sharing (the closest thing viruses have to sex) can occur under certain circumstances such as in crowded conditions where poultry, pigs, and people live in close quarters. This change can allow a virus to become much more infectious to humans and more easily transmitted from person to person. And this is where a "pandemic" comes in: it's a worldwide outbreak of a new influenza A virus between humans, while epidemics tend to be seasonal, involving viruses that already exist. For you history buffs, previous pandemics include: 1918-19: Spanish flu. Caused more than 500,000 deaths in the U.S., and 50 million worldwide. 1957-58: Asian flu. 70,000 deaths in the U.S. 1968-69. Hong Kong flu. 34,000 deaths in the U.S. Both the 1957-58 and 1968-69 pandemics were caused by viruses containing a combination of genes from a human and an avian influenza virus. It may be reassuring to note that the number of deaths has decreased with each pandemic, possibly due to better supportive medical care. The avian flu's jump to humans was first detected in 1997, although all the human deaths reported so far (about 60 since 2003) have been due to transmission from animals to humans. There has been more concern recently because the virus has been detected in migratory birds which can't be caught and killed - and which may carry the virus to Europe and Africa within the next two migratory seasons. The consensus is that although it's possible an avian flu epidemic may occur, no one can predict if it will take place in weeks or years. It all depends on when that genetic shift (from birds to humans) takes place. There has been no detection of this virus in the U.S. It is possible for travelers to be infected, but most of the cases in humans have been in those with closer contact to birds than a casual traveler has. Since the infection occurs via fecal-oral route, to reduce your risk while traveling, avoid bird markets, zoos, and areas in parks, etc. with high concentrations of bird feces. Countries that are the most vulnerable to this flu are Indonesia, Vietnam, and Cambodia, due to their high concentration of bird markets. Other areas involved are Thailand, China (south and north), Tibet, Russia, Kazakhstan, and Mongolia. For an update on outbreaks before you travel, check the <a href="http://www.cdc.gov/travel/seasia.htm">CDC info for southeast Asia</a> and <a href="http://www.cdc.gov/travel/eastasia.htm">east Asia</a>. Symptoms of bird flu in humans have ranged from typical flu-like symptoms (fever, cough, sore throat, muscle aches) to eye infections and pneumonia. If you feel you've been exposed, there are a couple of treatment recommendations available today that you may want to discuss with your doctor. Until these are tested in a pandemic, however, their true efficacy is unknown. There are currently no vaccines available, but many companies are working on them. Bottom line: For now, avian flu is just a "virus of interest" to medical researchers. Of course, you should always consult with your own doctor about any medical conditions or risks that concern you.

Bird flu basics

Posted by Taraneh Razavi, M.D., Staff Doctor As flu season approaches, there's been a lot of talk about bird flu. I thought I'd try ...

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The Green Goddess beckons

Posted by John Dickman, Food Service Manager Another of our <a href="http://googleblog.blogspot.com/2005/08/keyword-chefs.html">chef candidates</a> has come, cooked, and left us with this tangy offering. (Previous recipes are <a href="http://googleblog.blogspot.com/2005/09/job-requirement-food-must-taste-great.html">here</a>.) Green Goddess Dressing 1 bunch green onion, ends trimmed 10 sprigs parsley, stems removed 6 sprigs fresh thyme 2 tsp. dry tarragon 5 sprigs fresh dill 5 anchovy fillets 1 c. mayo 3/4 c. sour cream 3/4 c. white or red wine vinegar 1 T. sugar 2 tsp. salt 1 tsp. ground black pepper 2-3 cloves garlic Throw all ingredients in a blender (preferably rinsed of margarita residue), and blend, blend, blend. If you've got time, let it sit overnight - this helps marry the flavors and enhances the tarragon. Transfer the dressing, rinse blender well and resume margaritas while waiting to serve Green Goddess on your favorite salad, as a veggie dip, or as a sauce for fish or chicken. If refrigerated it will last up to a week or more.

The Green Goddess beckons

Posted by John Dickman, Food Service Manager Another of our chef candidates has come, cooked, and left us with this tangy offering. (Previo...

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Feed the world

Posted by Chris Wetherell, Software Engineer, Google Reader So we've added a new experiment to Google Labs: <a title="http://www.google.com/reader">Google Reader</a>, a service we hope helps you spend more time reading what's important to you (or is, if you'd prefer, nicely diverting). The Reader team is excited to begin iterating in public, and now that Jason Shellen's announced it at <a href="http://www.web2con.com">Web 2.0</a> we're excited to get your feedback on this early-stage effort. We often get asked how anyone's supposed to keep up with the firehose of stuff launched from the web's spigot, so we're offering Reader as a way to help. Like the <a title="http://www.google.com/ig">Personalized Homepage</a>, it's a part of Google's ongoing effort to bring together personalized web content to make information more relevant to users. And, because I rarely get a forum like this, I'd personally like to thank Google for being able to participate in building Reader with the sorts of accomplished engineers who help keep these web bits pretty interesting. (Waves to Search, Gmail, Maps, Print, News, Suggest, etc.) Thankfully, we're not alone -- everyone involved from corporate entities to thousands of independent developers seem to be focused on lowering the barrier to entry for actually making feeds useful. For a quick intro to Reader, <a title="http://www.google.com/reader/things/tour">take the tour</a>, or just get started. I'd make recommendations from my starred items, but a quick scan reveals "still waters running deep" isn't me - I keep my item pool filled with snark (<a href="http://www.gawker.com">Gawker</a>) or techno-fetishism (<a href="http://www.engadget.com">Engadget</a>, I'm looking at you). So go to <a href="http://labs.google.com">Google Labs</a> and give it a try. If you're interested in making Reader better, please <a href="mailto:labs+reader@google.com"> let us know</a>, as we plan on keeping the experiment alive and kicking as long as there is stuff being syndicated.

Feed the world

Posted by Chris Wetherell, Software Engineer, Google Reader So we've added a new experiment to Google Labs: Google Reader , a service w...

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Google goes to Washington

Posted by Andrew McLaughlin, Senior Policy Counsel It seems that policymaking and regulatory activity in Washington, D.C. affect Google and our users more every day. It’s important to be involved - to participate in the policy process and contribute to the debates that inform it. So we’ve opened up a shop there. The first member of our Washington team is <a href="http://www.google.com/search?q=alan+davidson">Alan Davidson</a>, a veteran thinker and advocate for issues we care about. Our mission in Washington boils down to this: Defend the Internet as a free and open platform for information, communication and innovation. OK, that sounds a little high and mighty, so let me break it down into something a bit wonkier with a sampling of the U.S. policy issues we’re working on: Net neutrality. As voice, video, and data rapidly converge, Congress is rewriting U.S. telecommunications laws and deregulating broadband connectivity, which is largely a good thing. But in a country where most citizens have only one or two viable broadband options, there are real dangers for the Internet: Should network operators be able to block their customers from reaching competing websites and services (such as Internet voice calls and video-on-demand)? Should they be able to speed up their own sites and services, while degrading those offered by competitors? Should an innovator with a new online service or application be forced to get permission from each broadband cable and DSL provider before rolling it out? Or, if that’s not blunt enough for you, what’s better: [a] Centralized control by network operators, or [b] free user choice on the decentralized, open, and astoundingly successful end-to-end Internet? (Hint: It’s not [a].) Copyrights and fair use. Google believes in protecting copyrights while maintaining strong, viable fair use rights in this new digital age. We support efforts by the U.S. Copyright Office to facilitate the use of orphan works (works whose rights-holders can’t be found), while fully respecting the interests of creators. We applauded the Supreme Court’s carefully calibrated decision in the <a href="http://www.supremecourtus.gov/opinions/04pdf/04-480.pdf">Grokster case</a>, but <a href="http://www.netcoalition.com/index.asp?Type=B_BASIC&SEC=%7b39C7921D-0158-4734-A981-47FABDF24742%7d">worked</a> to defeat <a href="http://thomas.loc.gov/cgi-bin/query/z?c108:S.2560:">legislation</a> that would have created new forms of liability for neutral technologies and services like Google. Intermediary liability. As a search engine, Google crawls the Internet, gathering information everywhere we can find it. We’re a neutral tool that allows users to find information posted by others – like a continuously updated table of contents for the Internet. Not surprisingly, we don’t believe the Internet works well if intermediaries and ISPs are held liable for things created by others but made searchable through us. That’s why Google will continue to oppose efforts to force us to block or limit lawful speech; instead, we focus on providing users the information, tools, and features (such as <a href="http://www.google.com/help/customize.html#safe">SafeSearch</a>) they need to protect themselves online. This is just a taste. We’re also engaged in policy debates over privacy and spyware, trademark dilution, patent law reform, voice-over-Internet-protocol (VOIP) regulation, and more. The Internet policy world is fluid, so our priorities will surely morph over time. And, of course, Google is a global company. In a future post, we’ll introduce you to some of the policy issues we’re confronting outside the U.S.

Google goes to Washington

Posted by Andrew McLaughlin, Senior Policy Counsel It seems that policymaking and regulatory activity in Washington, D.C. affect Google and ...

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How I got to Google, ch. 1

Posted by Michael Krantz, Google Blog Team -- via craigslist, and thanks for asking. Our engineers, though, tend to come by more varied, and occasionally odder, routes. Some get recruited out of grad school, or by friends or former colleagues. Others just send their resumes to jobs@google.com. For a few engineers, though, the path has been more interesting. <a href="http://www.flatfeetpete.com/musicbox/index.html">Peter Bradshaw</a>, for instance, built “a music playing system based on printed cards with barcodes and webcams. Includes lego!” (No, I don’t know what that means, either.) Over the next few weeks, we’re going to post some of their stories. Like this one, from Systems Administrator Aaron Joyner: <a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="http://googleblog.blogspot.com/uploaded_images/AaronJoyner-790730.jpg"><img alt="" border="0" src="http://googleblog.blogspot.com/uploaded_images/AaronJoyner-789182.jpg" style="margin: 0pt 10px 10px 0pt; float: left; cursor: pointer;" /></a> My story started when I came into work one morning and was unable to look up something on Google. Being the sysadmin for my company at the time, it was my responsibility to resolve the problem, so I started poking around. It turned out that our DNS server [ed: all the jargony stuff you'll hear in this anecdote refers to the software that websites use to connect and talk to each other] was returning an error when trying to look up google.com, specifically a server failure error. Just as I’d convinced myself that it wasn't our problem but Google’s, the problem suddenly resolved itself. I promptly forgot about it and went back to my regular work. But then I came in the next morning and had exactly the same problem, so I started looking at Google's DNS responses very closely. It became clear that the specific combination of delegations and glue records they were returning [ed: see note above] would result in an eventual error approximately once per day, and this would then take it about five minutes to give up and try again. Not entirely convinced that I should point the finger at Google yet, I posted <a href="http://www.trilug.org/pipermail/trilug/Week-of-Mon-20050328/033828.html">a message</a> to my local Linux Users Group asking if anyone had had problems with resolving google.com addresses and got a couple "Yeah, I did have a problem like that once recently" responses. Thus reinforced, I headed over to Google.com, found the "Contact Us" page and the "Report a problem" link, chunked in a brief problem description and a link to the <a href="http://www.trilug.org/pipermail/trilug/Week-of-Mon-20050328/033838.html">archived copy</a> of the long technical description from that same mailing list thread, and thought to myself, "Gee, I'll never hear about that again." But then one afternoon a week later I get an email that said, basically, "We've received your problem report, and forwarded it on to the appropriate department, if they need any further information they’ll contact you. Thanks." Again, I thought, "Gee, how nice. I'll never hear about that again." But that evening I got an email from Dave Presotto (the guy who wrote the DNS server for Plan9) saying that he was looking into it and would get back to me. Forty-five minutes later I got another email, this one describing how he believed they had accidentally fixed the problem earlier in the week due to general code cleanup, and asking what I thought of the solution. After I recovered my senses and stopped bouncing around the room, I had a few email exchanges with Dave, in the course of which I asked casually if they needed any good sysadmins out in Mountain View. He referred me, and the rest is history.

How I got to Google, ch. 1

Posted by Michael Krantz, Google Blog Team -- via craigslist, and thanks for asking. Our engineers, though, tend to come by more varied, and...

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