[edblarney]

" Google is pretty serious about expenses and costs"

Which validates my point: the value of the 'free food' is a calculation. It's based on employee productivity gains, retainment etc.. If it wasn't an economic value-add, it would be canned.

"Google stock doesn't give dividends: all profits are reinvested in the projects"

Sorry to be picky but this statement is not true at all.

1) It does not matter whether a company pays dividends, or a company retains the earnings for shareholders. Economically - they are equivalent. In practice, companies get valued a little bit differently ... but financially they are equal.

2) A company that 'reinvests all profits in projects' is called a 'non profit' - and would mean a share price of $0. :) :) :)

[euyyn]

The definition of retaining earnings is reinvesting profits in the company's projects; I'm not sure what made you think only non-profits do it. It's pretty common for companies that are growing. In any case, that was just one easy way to show you you're wrong in thinking this:

> [Google] literally have billions more than they know what to do with

Google knows exactly what to do with it, and from my understanding hasn't ran out of business ideas for that since its founding.

[edblarney]

"The definition of retaining earnings is reinvesting profits in the company's projects;"

No, it's not.

More importantly - your statement that "Google re-invests all profits in projects" is definitely not true, moreover, it's relationship to 'dividends' is not relevant at all.

"Google knows exactly what to do with it, and from my understanding hasn't ran out of business ideas for that since its founding."

Again, not true.

That any company has such a large war chest is strong evidence that they have no clue how to spend it.

Yes - it's important to have a fund for acquisitions and to take on unforeseen threats, but it's generally accepted that near monopoly providers have this problem.

Microsoft had so much money relative to earnings at one point - that financial analysts started to treat it as a 'fund' as opposed to a product company - and use different metrics to understand it's efficiency.

These companies have very low capital efficiencies, and all that money is seen as a drag on many measures of efficiency, which is why they are strongly pushed to return the money to shareholder - who can put it to work more effectively elsewhere.

Google has absolutely no idea what to do with at least 1/2 of assets that it is sitting on, which is why they are sitting on them.

Put another way:

If Google did have amazing, high-ROI projects to invest in, they situation would be the opposite: they would be spending it all - and likely taking on debt (because it's very cheap right now) - which would be a way to leverage their 'amazing projects' quite dramatically and to make more money.

'High growth' companies should almost always be leveraging up, because that's how they can get the most out of whatever it is that they are doing. Same for companies that can forecast consistent returns.

If your 'business idea' is getting more ROI than your 'cost of capital' then the more you lever up, the more money you make.

But no. Google has nowhere to spend the money.