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Alphabet (GOOGL) to Sell Terra Bella Business to Planet Labs
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Alphabet Inc.’s (GOOGL - Free Report) Google announced on Friday that will sell its Terra Bella Imaging satellite business to Planet Labs.
In exchange, Google receives a stake in planet and will also enter in to a multi-year contract to buy its Earth-imaging data.
Google did not disclose the financial terms of the deal. Bloomberg had reported in January that talks were in progress between the two companies.
For the last six months, Alphabet has outperformed the Zacks Internet-Services industry. It has returned 1.87% compared with the industry’s return of 1.17%.
Formerly known as Skybox, the Earth imaging company was founded in 2009 and the search giant bought it for $500 million in 2014, the same year when Skybox was named no. 1 on Inc. magazine's 25 Most Audacious Companies. Google rebranded it to Terra Bella last year.
In Quest of Financial Discipline
The move underscores Alphabet’s efforts to trim relatively less-revenue generating businesses and attain financial discipline. The company could save more by purchasing satellite imagery from a third party instead of operating its own imaging satellite business.
Alphabet’s sales, marketing and R&D expenses have gone up considerably in the last five years. There are also some other margin pressures. The most significant at the moment is related to currency, which continued to impact Alphabet’s results despite the fact that it has a hedging program in place.
Other expense pressures include fast-paced international growth, a growing volume of lower-priced YouTube clicks and strength of the mobile platform. So we believe that Alphabet has foreseen an escalation of costs in the years to come and is gearing up well in advance with decisions like these.
The company has recently been getting rid of its audacious ventures. In Aug 2015, it reportedly curbed the expansion of its high-speed fiber optic Internet network, cutting 9% of its staff. In November, the company scaled back Project Wing, its experimental drone delivery program.
Benefits for Planet Labs
Privately-held Planet Labs operates with dozens of small satellites that take pictures of the Earth surface frequently. However, the resolution of the images is low. Terra Bella has larger satellites with high image resolution but its fleet contains only seven satellites, which limits the frequency of capturing images.
Thus, we believe that through this acquisition, Planet Labs will add high resolution satellites to its fleet. Both companies share the satellite imaging space with giants like Airbus Group’s (EADSY - Free Report) Airbus Defence & Space and DigitalGlobe (DGI - Free Report) .
Zacks Rank and Stocks to Consider
Currently, Alphabet is a Zacks Rank #3 (Hold) stock. A better-ranked stock in the broader technology sector is Intersil Corporation , carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
For the current year, the consensus estimate for Intersil has increased 1.5% in the past 30 days.
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Alphabet (GOOGL) to Sell Terra Bella Business to Planet Labs
Alphabet Inc.’s (GOOGL - Free Report) Google announced on Friday that will sell its Terra Bella Imaging satellite business to Planet Labs.
In exchange, Google receives a stake in planet and will also enter in to a multi-year contract to buy its Earth-imaging data.
Google did not disclose the financial terms of the deal. Bloomberg had reported in January that talks were in progress between the two companies.
For the last six months, Alphabet has outperformed the Zacks Internet-Services industry. It has returned 1.87% compared with the industry’s return of 1.17%.
Formerly known as Skybox, the Earth imaging company was founded in 2009 and the search giant bought it for $500 million in 2014, the same year when Skybox was named no. 1 on Inc. magazine's 25 Most Audacious Companies. Google rebranded it to Terra Bella last year.
In Quest of Financial Discipline
The move underscores Alphabet’s efforts to trim relatively less-revenue generating businesses and attain financial discipline. The company could save more by purchasing satellite imagery from a third party instead of operating its own imaging satellite business.
Alphabet’s sales, marketing and R&D expenses have gone up considerably in the last five years. There are also some other margin pressures. The most significant at the moment is related to currency, which continued to impact Alphabet’s results despite the fact that it has a hedging program in place.
Alphabet Inc. Total Expenses (TTM)
Alphabet Inc. Total Expenses (TTM) | Alphabet Inc. Quote
Other expense pressures include fast-paced international growth, a growing volume of lower-priced YouTube clicks and strength of the mobile platform. So we believe that Alphabet has foreseen an escalation of costs in the years to come and is gearing up well in advance with decisions like these.
The company has recently been getting rid of its audacious ventures. In Aug 2015, it reportedly curbed the expansion of its high-speed fiber optic Internet network, cutting 9% of its staff. In November, the company scaled back Project Wing, its experimental drone delivery program.
Benefits for Planet Labs
Privately-held Planet Labs operates with dozens of small satellites that take pictures of the Earth surface frequently. However, the resolution of the images is low. Terra Bella has larger satellites with high image resolution but its fleet contains only seven satellites, which limits the frequency of capturing images.
Thus, we believe that through this acquisition, Planet Labs will add high resolution satellites to its fleet. Both companies share the satellite imaging space with giants like Airbus Group’s (EADSY - Free Report) Airbus Defence & Space and DigitalGlobe (DGI - Free Report) .
Zacks Rank and Stocks to Consider
Currently, Alphabet is a Zacks Rank #3 (Hold) stock. A better-ranked stock in the broader technology sector is Intersil Corporation , carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
For the current year, the consensus estimate for Intersil has increased 1.5% in the past 30 days.
Zacks' Top Investment Ideas for Long-Term Profit
How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>