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Alphabet is Betting Big on Growing Its Cloud Presence

Friday, November 4, 2016 7:25
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sky-cloudsOnce upon a time, Google parent Alphabet Inc (NASDAQ:GOOGL) was an early innovator in the cloud space, but now it’s fallen way behind Amazon and Microsoft.

But Google isn’t giving up. In fact, it’s redoubling its cloud efforts, partially out of a need to diversify away from what’s been its only real moneymaker from the start. From Bloomberg:

Alphabet, Google’s parent, is now intent on narrowing the gap with and Microsoft, in large part because it needs to build a reliable revenue stream that doesn’t come from ads.

In response, the company is making big changes internally and adding new talent to try and revive its cloud presence:

Last November, Alphabet asked board member Diane Greene to piece together the fragments of its cloud business. Greene, the co-founder and former chief executive officer of VMware, which develops cloud systems for companies, has unified several departments into a single unit called Google Cloud. In June she hired Tariq Shaukat to lead its growing sales team. Shaukat’s previous job was chief commercial officer for Caesars Entertainment in Las Vegas, making him a bit of an odd duck at a company populated by computer engineers.

Google is also growing through acquisition, with some saying it essentially has a “blank check” to gobble up as many cloud-focused firms as needed to restore growth to the segment.

There’s also been a change in culture at Google, which used to concentrate almost solely on developing tools for the masses. Now, for perhaps the first time, it’s actually putting time, effort, and serious money toward enterprise apps whose customers could number in the low seven-digits — a small figure in Google’s terms.

The efforts are beginning to pay off, but Google is still way behind:

Google’s share of the cloud market has doubled, to about 5 percent, in the past year, but Amazon AWS has 43 percent and Microsoft 12 percent.

Alphabet shares fell $1.72 (-0.22%) to $780.47 in Friday morning trading. Year-to-date, GOOGL has gained 0.50%, versus a 2.5% return from the benchmark S&P 500 in the same period.


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