Alphabet’s ‘Moonshot Projects’ Lost $859 Million Last Quarter

Seth Fiegerman, reporting for CNN Money:

Alphabet, the parent company of Google, saw sales from its so-called moonshot projects hit $185 million in the quarter ending in June, more than doubling sales from the same quarter a year ago. But the company is losing far more money from those efforts. Losses for “other bets,” as Alphabet characterizes the segment, rose to $859 million for the quarter from $660 million a year earlier.

Those bets include risky, capital intensive projects like self-driving cars and Google Fiber, which delivers high-speed Internet. Most of Google’s sales in this group are said to come from Fiber as well as Nest, and Verily, a life sciences division. Those mounting losses may put a dent in Alphabet’s pitch to Wall Street that it can be more responsible with its spending.

Alphabet as a whole reported $4.88 billion in profit for the quarter, so these moonshots are well within the company’s means, but you can see why investors might want to see the company shut these things down.

They’re obviously worried about it. Last week they granted Conor Dougherty of The New York Times behind-the-scenes access, which included this observation:

What all these efforts have in common, besides imaginative power, is that they do not make any money. X’s budget and head count are a secret, but shareholders’ perceptions about the division were aptly summed up by a poster board in its Mountain View, Calif., offices. It had a picture of a burning $100 bill followed by, “Investors think we do this.”

And:

The combination of big ideas, lofty rhetoric and a strict code of secrecy has made X a source of endless speculation and conspiracy theories. The one you hear most frequently, usually from competitors and venture capitalists, is that X is a giant public relations plan to distract regulators from Google’s search business, which is under scrutiny around the world.

Cynical though that sounds, it points to something that seems fundamentally true: Many of history’s great corporate research efforts, like Bell Labs and Xerox PARC, have come from companies that were monopolies or close to it.

★ Thursday, 28 July 2016