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Google’s $30 Billion for International M&A, Contract Manufacturer

Google expects foreign operations outside the US to become a significant portion of its expansion plans requiring capital between $20 billion and $30 billion for merger and acquisition (M&A) activity and $2 billion to $4 billion for capital expenditures. The letter to the US Securities and Exchange Commission dated December 2013, in response to questions from regulators during a regular review of its filings, explains the stockpile of cash outside the US. I think part of the investment should go toward building a high-tech manufacturing facility.

Hardware has become a major focus for Google. It continues to build hardware products that people can touch and feel such as self-driving cars, Chromebooks, smartphones, and tablets. It also acquired about half a dozen robotics companies in the past year.

Non-US markets contributed 50% to Google's annual revenue in 2012. The company spent about $1.4 billion on more than 20 strategic deals in 2013 through the beginning of December, including the $1 billion acquisition of Waze. Not all acquisitions are Internet or software- related, nor are they in the US.  

“We have significant financial needs outside the US to fund our continued market growth and expansion through mergers and acquisitions, on-going research and development, and investments in datacenter and other infrastructure and real property,” per the filing

The most recent buzz around Project Tango from the Google's Advanced Technology and Projects (ATAP) group focuses on robotics and computer vision. ATAP's work gives mobile devices an understanding of the nearby physical space. In other words, the former Motorola division designs technology that tracks 3D motion and creates a model of the environment around it.

Futher, Google plans to spend more than $1 billion to build 180 satellites connected to Project Loom, an experiment to use high-altitude balloons that bring Internet access to remote areas of the world. Satellite-communications founder O3bNetworks Greg Wyler will lead the project and a team of about 20 people. Manufacturing the satellites would give Google more control of technology and security.

Hardware requires the procurement of raw materials and manufacturing. Historically these are not Google's strong points, but the backend infrastructure running the supply chain and the facility would likely go down in the history as the pristine facility of the future.

Let us say Google builds a manufacturing facility outside the US. What would it cost them? About $300 million, estimates Ann Grackin, CEO at ChainLink Research. She believes Google would build a state-of-the-art facility equipped with the latest technology and procedures. Google would likely tie robotics to a Web-based portal supported by a cloud computing brain that allows the supply chain folks running the facility to share information with raw materials partners, distributors, and retailers.

Keeping costs down and quality standards high would drive sales and brand value higher. In May, Millward Brown, a research agency specializing in advertising and marketing, released a study revealing that Google's brand value rose 40% to $158.8 billion in 2013, surpassing Apple, which dominated the No. 1 position for three consecutive years. Apple saw its brand value fall 20% to $147.9 billion in the latest report.

Google likely would invest another million or two to connect the latest mobile technology in the manufacturing facility. The company would not only build the hub of the future, but attract to the professions of supply chain and manufacturing more young people with higher technical and engineering skills, as baby boomers continue to retire and leave jobs unfilled.

There's an overall stigma in supply chain and manufacturing that both professions are dark and unglamorous, but a high-tech company like Google building a state-of-the-art manufacturing facility would change the perception and the skills required to do the jobs.

37 comments on “Google’s $30 Billion for International M&A, Contract Manufacturer

  1. Laurie Sullivan
    June 9, 2014

    Should Google build a manufacturing facility in the U.S. or overseas? What type of technology would it run? Who would run it? What type of mobile apps from SAP, Oracle or Microsoft would you use and how would you tie it into the cloud? If you ran the facility, would you contract open time to other manufacturers?

  2. Eldredge
    June 9, 2014

    If Google is setting aside $30B for foreign investment, the $300M for a state-of-the-art facility seems like a drop in the bucket. Wouldn't it be nice to invest some of that stateside?

  3. Hailey Lynne McKeefry
    June 9, 2014

    @Laurie, all good questions…I think that Google, like many high tech companies, is going to be looking at the best way to serve existing customers and attract new ones. That will inform how and where their newest manufacturing efforts will be placed.

  4. Hailey Lynne McKeefry
    June 9, 2014

    @Eldredge, i can't imagine that Google's efforts will be completely focused outside of the US…that wouldn't make sense at all.

  5. Eldredge
    June 9, 2014

    @Hailey – Just noticed a typo on my subject – shouid have been “$30B (witha B) versus $300M”.  Oh well.

        I'm sure you are right. I was just thinking that the investment in a new facility, as estimated in teh article at $300M, is a small fraction of the assets available for investment and M&A. Would be nice to attract a portion of that.

  6. Laurie Sullivan
    June 10, 2014

    I can see Google benefiting from building a manufacturing facility in the U.S. based on the latest technology, cloud computing, mobile devices and best practices. The company has the financial means, technical experience, connections, and the ability to bring in new talent from universities around the world. If they don't build a facility, the company will miss a major opportunity to create jobs and lead supply chain and manufacturing into the next phase. Applying their advertising skills to the manufacturing supply chain would benefit the electronics industry. It would also benefit Google's ad business to analyze the shortcomings of the electronics manufacturing industry. 

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