Daily Tech Snippet: Tuesday, February 2nd

• Alphabet, Google’s Parent Company, Grows Briskly to Close in on Apple: Wall Street got its first glimpse of the financial details of a new conglomerate called Alphabet on Monday. Investors liked what they saw so much that the outfit formerly known as Google is poised to become the world’s most valuable company. Alphabet’s total revenue, barring currency fluctuations, increased 24 percent to $21.3 billion, when compared with the same period in 2014. Shares of Alphabet were up more than 5 percent in after-hours trading. Google was notorious for its indifference to Wall Street. But Alphabet has been a model student, reining in its expenses, using $5 billion of its $73 billion cash hoard to repurchase company stock and, with this latest report, giving investors more insight into how Google’s core business is performing. The new disclosures, combined with its more investor-friendly tone and, of course, continued strong growth in its advertising business, are the main reasons Alphabet stock has jumped 43 percent from a year ago, putting it neck and neck with Apple as the most valuable company in the world. The benefit of segment reporting for Alphabet and other high-growth Internet companies is that when investors are allowed to take an unvarnished look at how profitable one side of the business is, it tends to make them more forgiving of losses elsewhere. Or at least that was what happened with Amazon, which recently began separating its retail operations from the results of its highly profitable cloud computing business, and Netflix, which used segment reporting to show investors that while it might be losing money internationally, its North American streaming business is doing well. Advertising continues to account for the lion’s share of the company’s revenue, and search advertising is about three-quarters of total revenue, according to estimates by Mr. Mahaney. For now, most everything investors are excited about also has to do with advertising. This includes YouTube, whose annual revenue is now estimated at somewhere from $4 billion to $8 billion, and the Google Play store, Google’s mobile app store, which takes a cut of app revenue but recently started selling in-store advertisements.

• Google’s Moonshots Cost Lots of Money, but Running Google Costs Even More: For years, Larry Page told Wall Street he wasn’t blowing all of Google’s money on crazy bets like self-driving cars and smart contact lenses. Turns out, he was right. If the first dual-structure Alphabet earnings showed us anything, it’s that the biggest costs for the Internet giant are not from its various non-Google projects. They’re from Google itself. Case in point: In 2015, capital expenditure — servers, real estate and stuff like that — ran $8.85 billion for Google’s core business. Cap ex for the Alphabet remainder — from the self-driving cars to the Fiber broadband business to two biotech companies — was far less, at $869 million. Operating loss for those units was just north of $3 billion. That is, Google spent more than twice as much on its basic ad business than on its change-the-world projects. The reason? Running core Google is still expensive — particularly the massive data server infrastructure, which remains part of Google. So is its very large and very expensive research division, despite the fact that lots of that work, like its artificial intelligence and VR efforts, end up in other Alphabet projects, such as autonomous vehicles.

• Google Parent To Overtake Apple as World's Most Valuable Company: Google parent Alphabet Inc. is poised to become the world’s most valuable company, taking the crown away from Silicon Valley rival Apple Inc. after reporting higher profit and sales fueled by a booming advertising business that’s supporting ambitious new projects. Alphabet’s shares jumped as much as 9.4 percent in extended trading, putting it on track to surpass Apple’s market capitalization of $534.7 billion. The Web company has been inching closer to the iPhone maker as investors lose confidence in Apple’s smartphone business and wager that Alphabet has a clearer path to growth. Apple first passed oil giant Exxon Mobil Corp. as the world’s most valuable company in 2011. By changing its name and structure last year, Alphabet Chief Executive Officer Larry Page has put the focus on the company’s main Web business while giving more insight into investments in new areas such as artificial intelligence, self-driving cars, health technology and fast Internet access. Even though Apple has also been building expertise in cars and AI, the secretive company has kept much of that under wraps. With iPhone sales slowing and China’s growth engine sputtering, Apple is on pace to post its first revenue decline in 15 years. Alphabet sales are estimated to climb 16 percent this year. The shares of Mountain View, California-based Alphabet rose to $843 in extended trading from $770.77 at the close in New York, suggesting that the Web company’s market capitalization will exceed $550 billion when trading resumes on Tuesday. While Apple generates more than triple the revenue and profit of Google, investors focus more on future prospects than past performance. It’s a market truism that’s particularly acute in the technology industry, where new breakthroughs can rapidly undercut previously reliable business models. Apple and Alphabet’s ascendance to half-trillion-dollar-plus valuations illustrates the premium investors put on U.S. technology companies. Five of the nine most valuable companies in the world are from the industry -- Alphabet, Apple, Microsoft, Facebook and Amazon.com.

• Evernote Will Shut Down Market, Its E-Commerce Effort, On Wednesday:  Some more news from Evernote — the note-taking app and startup of the same name — that speaks to the company’s current rough patch: today it announced that as of Wednesday at 6pm Pacific, it will shutter Market, the e-commerce platform where it sold Evernote swag and Evernote-integrated office products, in an attempt to create another revenue stream around its more dedicated users. Separately, we’ve also learned that there is another senior departure at the company: Ronda Scott, the company’s longtime head of comms, is leaving at the end of this week. The moves come at what has been a pretty difficult period for the startup. Developments have included a number of senior departures, including that of the previous, longtime CEO Phil Libin; other underperforming products getting axed, and the startup — once commanding a $1 billion tag — among several whose valuations have more recently been marked down by large fund managers. In a blog post announcing the news today, head of partnerships John Hoye wrote that the move is being made as part of Evernote’s restructuring around its core business as a software — not e-commerce — company. Evernote is a startup based around keeping documents in the cloud — and eliminating the need for paper. So when the Market and its focus on notebooks and other products was introduced in 2013, it did feel a little out of left field. A year after that the company said it had sold some $12 million in goods through the store. And today it updated that with other numbers: over 800,000 Evernote Moleskine notebooks, 300,000 Jot Script styluses and nearly 20,000 ScanSnap Evernote Edition scanners. But at the end of the day, it seems those numbers did not really meet the costs of maintaining the operation. So now that Evernote is calling time on all frivolities; trying to get back to the heart of what made the startup so popular in the first place; and driving more premium users — which are up 40% on a year ago, a spokesperson tells me — the decision to shut the Market was probably an easy sell at the startup.