Solarwinds Inc. 1Q14 Earnings: Strong Quarter, Reiterate PT Despite Market Tantrum

Solarwinds Inc. reported 1Q14 earnings yesterday April 29^th and held a corresponding conference call market close at 5:00pm EST. Revenue came in at $95.PMM besting our estimate and street consensus of $93.7MM. Non-GAAP EPS came in at $0.41 vs street estimates of $0.36.

Solarwinds kicked the year off with a strong start sighting improvements in the EMEA and Asia-Pacific regions, which were detractors last quarter growing 35% and 41% respectively. The investments the company has been making translated into exceeding its revenue and profitability outlook for the first quarter and put it in a good position to deliver on its full year goals. License revenue was up 18% yoy despite a strong increase in license growth last quarter and a tough comparable yoy. Reoccurring revenue now accounts for 62% of total revenue, which is forecasted to continue growing as the company will likely add to its subscription based portfolio of products.

The company has consistently driven customer retention rates, which are best-in-class across all of their core product areas and geographies. Strengthened by the management adjustments made last year sales team count will continue to increase over 2014 consistent with the pace of their revenue growth. Total employees added over the quarter were 45 in major functions bringing total global headcount to 1,357.

The company reiterated guidance of $409.0MM-428.0 sales and $1.60-1.70 EPS for FY14. Analyst expect EPS of $ 1.61 on revenue of $415.6MM. It should be noted that capex increased to $6.0MM attributable to the build out of their new headquarters in Austin. This will increase operating expenses for the remainder of the year, which is factored into their guidance. Until the company sees positive effects from the initiates that kicked off in late 2013 it will not include the effects in their guidance. Their cautious outlook recognizes that the company has yet to begin to realize impact from a meaningful portion of the incremental investment in their business initiated during the second half of 2013.

To our dismay the stock reacted negatively down ~6.0%. Largely we view the selloff due to the cloudiness sounding the 2013 investment realization akin to a solid quarter by any metric. We are maintaining our PT of $52.00 last raised from $46.00 on 3/3/14. We entered this position at $32.95. Despite the recent sell off we are still up ~20% on the name. Currently the stock sells for 36x earnings compared to 38x historically. Our half position will be monitored carefully as the stock is close to our sweeping stop loss.

Spirit Airlines 1Q14 Results

Q1 Earnings      
   Spirit Airlines reported 1Q14 earnings today with revenues of 438 million up 18.2 % year over year in line with estimates of 437.91 million.  Earnings per share were reported as 52 cents per share beating estimates by 1 cent.  Profit increased 15.4 % year over year to 37.8 million as well as operating income was up 13% year over year to 60.1 million.  Operating margin was up 13.7% year over year and revenue per available seat mile was down 2.4 % year over year.  Spirit ended the quarter with 544 million dollars in unrestricted cash as well as no debt on their balance sheet.  Staggering data shows that 256 cancellations occurred in the first quarter compared to 59 cancellations last year.  With revenue still growing 18% year over year this data represents Spirits ability to continue to increase revenue growth with their attractively low ticket fares and new destinations.  One last fact to mention is that Spirit reported a 99.8% controllable completion factor which is significant for customer satisfaction.

Outlook
   Spirit Airline was down about 3.13% to a price of 56.60; which represents the market selling off the facts.  Spirit plans to add Kansas City International in August as well as full year capacity guidance is increased to 17.8% from 17%.  From the beginning of the year we knew that this was going to be a year with increasing costs for Spirit due to new expenditures in adding aircraft as well as pilot costs.  However the investment thesis is still well in tact with Spirit having 40% lower ticket fares than other competitors which has been and will continue to be their main driver.  The aircraft fleet is now at 56 from 2 previously added aircraft's in the first quarter and 9 more are scheduled by the end of the year. Since I do believe the investment thesis is still intact I am remaining my price target of 64$, however it will be important to see how the market reacts over the next week.  If the company hits 52$ a share I will recommend a strong sell which will still give us over a 30% upside from our buying point.

Guillermo Dilone

CMI Q1 2014 Earnings

     Cummins (CMI) reported earnings on April 29th for Q1 of fiscal year 2014. Revenue's totaled $4.4 billion, a 12% increase year-over-year from 2013, beating consensus by $230 million. Earnings were reported as $1.87, beating consensus that had expected $1.67. The company closed at $150.81 on Tuesday after reporting earnings, up 3.86%.
     A strong quarter was driven by multiple segments on the company. The engine business increased year-over-year by 11%, with the components division delivering record quarterly revenues and earnings as sales were boosted 21%. Revenue in the distribution increased 22% in the first quarter, but had negative earnings due to increased expenses attributed to acquisitions. The Power Generation segment took a loss of 14%, being attributed to negative currency movements, particularly how the US dollar is being depreciated.
     North America, which holds nearly 47% of the revenue stream for CMI, had revenues grow by 25% in the first quarter, being attributed to the heavy-duty truck market exceeding predicated sales. Due to new EPA emissions regulations, the medium-duty truck market was up 74% over a weak quarter from 2013. Power Generation was weak in North America for Q1 2014, stemming from an unusually strong demand during Q1 2013.
     The engine segment's growth was driven by the North American demand for on-highway trucks, but was slightly offset as the industry is transitioning to Tier 4 Final standards. Revenue is expected to be up 6-8%, up from the original guidance of 4-6%. The components segment is expecting growth going forward from the stronger demand in North America, with margins now expected to be flat for the year instead a loss being expected from China. The Power Generation segment is expected more loses throughout the year, with foreign currency movements being seen as unfavorable for the segment. The distribution segment had most of its gains come from the acquisitions that were made just this past year. The segment is expected to strong for the year, with growth between 22-30%, with an additional $400 million to still be added to revenue in 2014 from the North American acquisitions.
     Revenues are expected to continue to be flat year-over-year, between 6-10% for the full year, with EBIT being slightly lowered due to the strengthening of the UK pound versus the US dollar. The revenue percentage is stemming from a perceived stronger demand in North America and, to a much smaller degree, internationally. Driving the company going forward will be their continued excellence in the engine and components business, and the benefits associated with their distributor acquisitions in North America. As we are approaching our price target, we need to reevaluate the company going forward to see if there is still growth to be found or if should sell out of it, but the company should remain a HOLD until that decision is made.

VISA Q2 2014 Earnings Release

Last Thursday, Visa, Inc. slated to report 2Q2014 earnings. Reported fiscal second quarter 2014 Net Income of $1.6 Billion, an increase of 26% over the last year. Or $2.52 per diluted share, an increase of 31% over the last year. These result a tax benefit of $218 million of which $201 million relates to prior periods. Excluding the prior periods’ impact, earnings per share was $2.20, an increase of 15% over the last year. Net operating revenue in the fiscal first quarter of 2014 was $3.2 billion, an increase of 7% nominally or 9% on a constant dollar basis over the last year, driven by solid growth in service revenues, data processing revenues and international transaction revenues. The strengthening of the U.S. dollar impacted net operating revenues by 2% points of negative growth during the quarter. And these business drivers remained strong during the Q2 with payments volume continuing to grow at solid levels. As the U.S. dollar appreciated which impacted softer net revenue growth, the company expect this impact to be slightly more pronounced next quarter before rebounding in their Q4.

Payments volume growth, on a constant dollar basis, for the three months ended March 31, 2014, was 12% over the last year at $1.1 trillion. Cross-border volume growth was 8%. And total processed transactions, which represent transactions processed by VisaNet were 15.4 billion, and 11% increase over the last year. The effective tax rate was 22.5% for the Q2. This rate was positively impacted by a $218 million tax benefit recognized. Cash, cash equivalents, and available-for-sale investment securities were $6.5 billion.

The weighted-average number of diluted shares of class A common stock outstanding was 634 million for the Q2. The company repurchased 5.1 million shares of class A common stock, at an average price of $217.61 per share, using $1.1 billion of cash on hand. At March 31, 2014, the company had $3.0 billion of remaining funds, authorized by the board of directors, available for share repurchase under the current program. And the company declared a quarterly cash dividend of $0.4 per share of class A common stock.

The stock was down 5% last Friday, because the payment technology company said economic against Russia could hurt their profits this year. I think we can still hold the company. This is based on the company’s strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, growth in Q2 earnings per share.

Cerner Corp. 1Q14 Earnings: Stop Loss Reached, Exiting Position

We have been forced to exit our full position in Cerner Corp as they have hit their stop loss following the release of their first quarter earnings.  Cerner Corp reported 1Q14 earnings April 24^th and held a corresponding conference call after market at 4:30 E.S.S.  Quarterly revenue came in at $785M, up 15% YoY, which was in-line with street estimates yet just short of our estimates of $811M.  Adjusted EPS was reported at $0.37 per diluted share, up 11% YoY, which was in-line with estimates once again but short of our bullish prediction of $0.38.  Cerner has also reiterated they have purchased 1.3 million shares and still have $142M left.

Due to a tough comparable in global hardware sales, tech resale declined in Q1, however, system sales revenue increased 4% offsetting the decline.  Total services revenue was up 25% YoY due to strong growth in managed services and solid contributions from ITWorks and RevWorks.  Although there were contributions from ITWorks and RevWorks Cerner was unable to form any new deals with clients.  A big driver of revenue in Q1 was ongoing sales of their broad suite of Revenue Cycle solutions.  A major milestone was achieved last year with the release of Healthe Intent Smart Registries solution which is a cloud-based platform that aggregates, normalizes, and standardizes clinical population data.  This quarter, Healthe Intent Smart Registries, along with Patient Portal, Enterprise Data Warehouse, and clinical process optimization, all had strong sales and these pipelines remain strong for the year.  Since January Cerner has also added 5 new CommunityWorks clients and in the process has displaced 6 significant competitors.  Cerner has also implemented automated inpatient and outpatient physician and nursing workflows in a 500-bed hospital in Saudi Arabia.  Following this implementation, Cerner has now implemented its solutions in 13 hospitals compared to the total of 1 that its competitors have combined.

For Q2, Cerner expects revenues between $790M and $830M where estimates are upwards of $815M.  Cerner also expects EPS to come in around $0.39 to $0.40 where estimates are sternly at $0.40.  Cerner’s guidance seems weak pending confidence that another wave of EMR purchases is in the near future.  According to Cerner, most of the purchases will disproportionately go to Cerner or their main competitor who they have a strong win rate against.  Following the release Cerner has been down almost 5% meeting our stop loss price.  This major decrease in stock price has mainly been attributed to their light guidance for Q2.  Although our thesis remains decently intact, we will be exiting our full position Monday.

Colgate Palmolive Q1 2014 Earnings Release

Colgate Palmolive, ticker symbol CL, reported earnings today that were in line with analyst expectations.  The global sales for the company remained flat at roughly 4.3 Billion with unit volume increasing by 5% and wholesale prices growing by 1.5%.  Unfortunately these were coupled with a negative 6.5% currency conversion effect due to fluctuations in the Venezuelan currency.  The end result is a 3% adjust earnings growth to $0.68 per share.

In terms of organic sales growth, Colgate saw 6.5% organic sales growth on the global level with 10% organic growth in key emerging markets.  Revenue was higher than expectations, particularly in North America, Europe, and in the South Pacific-Asia region.  Unfortunately sales in Latin America were lackluster, falling 5%.  This has a rather profound impact on the company as Latin American sales constitute 27% of overall sales.

Going forward, the company is looking to maintain high spending via advertising for the rest of 2014, in plans to expand into key markets.  Colgate expects diluted earnings to expand at a double-digit percentage for 2014.  Analysts expect 5.6% full year non-GAAP growth for 2014 and so far, investors have responded well to the earnings release.  The price target of $75 remains sufficient with the investment thesis remaining intact.

Union Pacific Q1 Results

Union Pacific reported Q1 results for 2014 beating EPS estimates by 1 cent, 2.38 compared to estimated 2.37.  They missed on revenues by about 40 million which was already signaled earlier in the quarter due to harsh winter conditions.  In Q1 Union started their 4 year repurchasing plan buying back 3.8 million shares which amounted to $683 million dollars.  Including $363 million dollars were spent in dividend payments which is a 32% year over year increase.  With Union Pacific staying committed to reaching a dividend payout ratio in the 30%-35% range they spent about 1 billion dollars in share buybacks and dividend payments in the first quarter alone.

Freight revenue was up 6% to 5.3 billion, crude oil volume declined 18% which was caused by price spreads across the region.  Coal revenue increased 3% and 7% in volume due to a cold winter and high natural gas prices.  Industrial revenue increased 10%, mainly due to high demands for fracturing sand as well as salt which were both up 22 and 28 percent respectively.  Intermodal as well was up 4% year over year and agricultural revenue was up 16 %.  Operating revenue grew 7% to 5.6 billion outpacing operating expense increases of 3% to 3.8 billion.  .05 cents/share were expenses due to weather and in the first quarter Union Pacific reached a new Q1 record of 1.8 billion in operating income.

Looking forward Union Pacific expects a rebound in the automotive market due to lower fuel prices, demand increases and dealer incentives.  Crude by rail is important to keep an eye on due to the impact from price spreads across the region.  Agricultural commodities revenue for the year will be based on the weather in the summer as well as the rest of the commodities are expected to continue to increase in the year going forward.  In 2014 Union Pacific is planning to invest 3.9 billion in infrastructure, which is a 300 million dollar increase from 2013.

All in all Union Pacific reported strong quarter 1 results despite the harsh economic and weather conditions.  With operating ratio reaching a Q1 record of 67.1% as well as new Q1 EPS quarter at 2.38, the worst quarter historically in performance is out of the way and still had significant performance. Going forward the fuel prices will be important to keep an eye on as they impact average revenue per car as well as economic conditions.  Union Pacific has been up about 2.7% since reporting and it previously closed at 192.05 and I am staying with my price target of $204.43.

HAL Q1 Earnings

Halliburton shares hit all time highs today after they reported q1 results. Earnings per share grew 9% to 73 cents beating street estimates by 2 cents a share. Revenues also beat consensus by $11MM coming in at $7.35B. The CEO, along with company analysts both agree that the company will see a 25% gain this quarter compared with the year ago period. Although we were looking to sell off some shares of HAL in the near future, I think it is safe to say we have some more return coming our way with this stock. With that being said, we will watch the company closely due to the fact that we have previously seen this stock increase drastically since we bought in to it, and even though I believe there is still a bit more return to be made, I believe it's best days are in the past.

Google misses high expectations from Wall Street analysts

                Google missed street estimates on both the top and bottom line and was down 3.15% percent for Class C and 3.26% for Class A shares in the after-hours. The company held these losses throughout today's trading day and are down around the same amount. Revenue came in at $15.42BB missing analyst expectations that were around $15.5BB according to a poll by Thomson Reuters. Non-GAAP EPS (excluding a one time charge) came in at 6.27 dollars per share, again missing the street consensus of 6.40 dollars per share. Although the miss is disappointing and investors are not thrilled about the high spending on acquisitions that provide no clear path to adding shareholder value, it’s really difficult to find a large-cap tech company that can generate 19% revenue growth YoY. Traffic acquisition costs also fell sequentially as a percentage of revenue coming in at $3.233BB or 23% of advertising revenues, down from $3.311BB last quarter. Paid clicks were up 26% YoY but suffered a sequential decrease of 1%. Cost-per-click was flat sequentially and down 9% YoY.

                Sites revenue was up 21% YoY coming in at $10.47BB. Network revenues from partner sites grew 4% and ended up at $3.4BB. Other revenues came in at $1.55 BB and were up 48% YoY. Gross margins also improved sequentially to 61.3% from 55.9% despite the uproar about rising costs.

                Investors are clearly not happy with the miss but the numbers came in line with our projections and we still believe that there is upside ahead. The company had very strong revenue growth in its core business and is carrying a PE multiple right around 28x their trailing twelve months earnings. The forward multiple stands at around 23x NTM earnings. These multiples are not taxing considering the 35x PE multiple that the company was trading at just weeks ago. Consensus estimates also seem rather low for next quarter at 5.09 dollars per share on a GAAP basis according to Factset. In conclusion we do not think that the earnings numbers were bad at all, but the contracting multiples may be a reason to go ahead and take profits. A decision will be made soon upon further analysis. 

Sandisk Corporation crushes consensus estimates trading up 10%

                SanDisk Corporation came in well ahead of consensus estimates on both the top and bottom lines. The company posted Revenues of $1.512 BB above the street and UASBIG estimate of $1.49 BB. On the bottom line the company posted a non-GAAP EPS value of 1.44 dollars per share, 18 cents above what Wall Street was expecting and 16 cents above the UASBIG estimate of 1.28 dollars per share. The company reiterated the strength of their growing enterprise storage and SSD businesses and managed to improve gross margins in the face a strong declines in NAND spot and contract prices. Solid state drive revenues (which include enterprise storage solutions) accounted for 28% of revenue this quarter up from 21% in Q4 2013. It is apparent that this has had a great impact on revenue and margin growth alike, perfectly aligning with our investment thesis. The company boasted 61% growth YoY in SSD revenues. NAND prices are estimated to have fallen 14% in February alone and warnings from the likes of Morgan Stanley cast shadows over the NAND space as a whole. SanDisk only witnessed a 7% decrease in its ASPs YoY and this could not be a better indication that the company has successfully made a shift into higher margin businesses. We expect that NAND pricing declines will be far less severe for the remainder of 2014 and we also can appreciate the fact that falling NAND prices can provide offsetting increases in demand for solid state drives and flash memory as a whole. Although some investors may be disappointed over the decrease in embedded NAND revenues that only accounted for 20% of revenue this quarter (down from 27% in FY 2013), The SSD business more than makes up for the very slight decline in this area YoY (less than 2%). Management also provided guidance that described an increase in the revenue mix of embedded solutions going forward. We also believe that this may open up the possibility for another earnings surprise if we can see a jump in sales for this area.

                The company achieved revenue growth of 12.9% YoY and EPS growth of 71% YoY. The 22.5 cent per share dividend program will extend into Q2 2014. The company is currently trading at a trailing P/E ratio right around 17 and the five year P/E average runs at around 15.5x trailing twelve month’s earnings. We believe that current earnings growth prospects justify a PE multiple of up to 19x between now and their next earnings release.

Gross margins came in very strong at 51.2% on a non-GAAP basis (49.6% GAAP). We cannot stress enough how impressive these margins are, again, in a quarter where the company sold off last week primarily due to crashing NAND prices and increased competition. Commercial sales were up 18% YoY and Retail sales were up 4%.

SanDisk was up 5.79% in the after hours after the conference call after a .68% gain during normal trading hours. The company has held onto these impressive gains and some into today’s trading day and is currently up over 10% on the day. We currently have a $90.40 price target on the company. There was very positive sentiment from CEO Sanjay Mehrotra during the call. He can be quoted saying, “We expect our enterprise SATA SSD to be a strong contributor to our enterprise revenue growth in 2014”. The Cloudspeed SATA SSD family was introduced this quarter and has clearly been met with success very quickly. The CEO also commented on the record breaking client SSD revenues and the benefit from a demand shift by a “major customer from our mobile custom embedded solutions to our client SSD solutions”. This sounds to me like the relationship with Apple could continue into solid state drives and that SanDisk SSDs could be making appearances in Apple’s future laptops. Other comments included positivity in retail innovation as well as on schedule fab upgrades. Half of bit production will be on the 1Y node in 2H 2014 and 1Z technology node production will begin in this same time period. Pilot 3D NAND lines are still scheduled to begin 2H 2015. All these production improvements are set to reduce costs and help the company hold industry leading margins. Blended cost per gigabyte improved 3% sequentially and 23% YoY. Blended selling prices decreased 3% sequentially and 7% YoY. Cash flows from operations were 358 million and 35 million was utilized for capital expenditures resulting in free cash flows around 323 milliion. 90 million dollars were used for share repurchases this quarter.

Forecasts Q2

                Convertible bonds due 2017 are being reclassified into short term debt due to the share price rising above the trigger price. These bonds are convertible in Q2 but it is unlikely debt-holders will convert due to the high price of the security. Revenue is projected at $1.55-$1.625BB for Q2 and $6.4-$6.8BB for FY 2014. Embedded mix should see gains compared to SSDs. Gross margin estimates are being revised upward to 47-49%. Operating expenses are projected at $315-$325 million non-GAAP for Q2 and $1.25-1.275 million for FY 2014. EBIT margins are projected at 27-31%. Similar taxes and non-operating income are expected. 2014 share repurchases should offset share count increases due to employee compensation and convertible debt.

CITIGROUP'S Q1 EARNINGS RELEASE

Citi released quarter one of 2014's earnings today, beating analysts estimates in several categories. 

They reported Net Income of $3.94 billion, up 3.5% yoy.

 EPS was flat at $1.23, and revenue fell .06% to $20.12 billion over an expected $1.14 and $19.37 billion.

Fixed-income trading, as hinted by the CFO earlier this month, fell 18%, compared to a drop of 21% in JP Morgans firm.  Bond-trading results are expected to fall across the industry this year,mostly because investors are waiting for more clarity from the Fed on int rates.

 Their equity-trading rose by 13%, over JP's 3%. 

Mortgage origination's stumbled 71% to $5.2 Billion, again similar numbers are appearing across the big banks.

In par with my thesis, Citi did a great drop of cutting expenses, operating exp's falling 1.1% yoy, even while litigation costs remained high, and probably will in the future. ($945 million)

The loss in Citiholdings, which contains the bad assets from the Crisis, fell from -$798 last year to -$292 this quarter. The total assets in Citiholdings decreased 23%.

The CFO said they are still waiting to get a detailed report from the Fed about why their capital plan was rejected. 

They also noted a second possible fraud in mexico, only totaling $30 million and should all be recuperated.

The stock climbed 4.36% to $47.67, finally back past our buy-in price of $47.57.  

Lawsuit between Walmart and Visa

The recent drop of 2.7% is due to the lawsuit between Walmart and Visa Inc. Walmart has sued Visa Inc. for a total of $5 billion USD. This is with regard to a allegedly high amount of card swipe fees taken by Visa during the various retail transactions of Walmart. There was no immediate response from Visa Inc. for this lawsuit. This case is based on strong precedent set by the $5.7 billion settlement Visa and MasterCard agreed in a class-action regarding the same matter. Meanwhile, Walmart has announced that it will switch its branded cards from Discover to MasterCard. This is a win for MasterCard and a missed opportunity for Visa Inc. In addition, Visa Europe is expected to slice down the rate that it charges for card transactions in Poland. It is also known as the interchange rate.The increase has been done of 0.5%, from 1.2 to 1.3 percent. The reduction will be effective from 1^st of July. As more and more retailers seek direct entries into the mobile payment industry, big retailers no longer want to share as much of their thin profit margins in paying electronic-transaction fees. They see mobile-based digital wallets as a way of circumventing Visa and its peers to keep more of their revenue for themselves.

In the Russian side, the suspension has been withdrawn, Russia has decided to have its own domestic payment system within six months to become more self dependent in the future. It is hard for Russian to start a new payment system, since Visa and MasterCard hold the lion’s share of plastic card market in

Russia.So it seems difficult for Russia’s planned domestic payment service to compete against these card giants.

Another FDA Approval for Integra LifeSciences

Integra LifeSciences has received FDA clearance for their Camino Flex Ventricular Catheter.  This catheter is designed to be used with Integra’s Camino Monitor which was approved last year and is already used in over 800 centers across the United States. This device is used with magnetic resonance imaging (MRI scans) and gives clinicians a more advanced system that can monitor ICP independently even when CSF flow cannot be measured, unlike competing catheters which depend on CSF flow.  Integra is not new to the neurosurgery industry, but has an already existing product line that consists of: cranial access kits and CSF drainage systems.  Their neurosurgery product line is their second largest segment, next to orthopedics, and reported $278,992 in fourth quarter revenue in 2013 coming from their neurosurgery segment.  This figure represents approximately one third of their total revenue for the respected quarter.

Google shares split 2 to 1

Google's new class C shares began trading yesterday April 3rd and are off to a rocky start. The shares were in the green by around half a percent yesterday but a sharp market-wide sell off sent them tumbling over 3 percent today April 4th. The stock had quite a rough few weeks after hitting highs above 1200 (600) a share and are down to the low 550s. The company really had quite a run so the profit taking is no surprise. The class A shares (GOOGL) have been outperforming the Class Cs (GOOG) at this point, something Google's management claims Class C shareholders will be compensated for after the first year of trading, so we will have to wait and see how that story develops. A few things may be sending the stock down at this point but the main thing on our radar is the fact that Facebook has been taking an increasing amount of mobile ad market-share. A recall has also been issued for Nest Lab's smoke alarms that resulted in a sales halt. Although the issue may take around three months to resolve a drop in the recent acquisition's sales will not have much of an impact. The threats are certainly being explored but Google has so many things up it's sleeve and we plan to hold on to the stock for sure. Google is set to unlock revenue streams beyond its core ad business in a rather long list of different markets. Executives recently discussed offering a fiber internet and phone service, and Chromebook, as well as Chromecast, sales have been strong.  A partnership with eye-wear company Luxottica will also present opportunities for Google Glass. We are especially interested in the Chromebook story considering the recent announced partnership with virtualization software company VMware. The next conference call will be extremely important after a miss last quarter. Investors are going to need to see earnings growth here if the stock is going to carry a lofty P/E multiple above the 30x range. Currently this multiple has actually dropped below 30 to around 29x and further contraction is certainly possible. After considering the serious growth prospects we highly doubt this multiple will drop below 25x.

According to Flurry's recent mobile ad stats,

-Google's services account for 18% of time spent on Android/iOS devices and Facebook is sitting uncomfortably close at 17%

-eMarketer estimated 49% of global mobile ad expenditures went to Google with 17.5% going to Facebook.