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2008 Annual Report
About Google!

Table of contents

  • Page 1
    About Google! 2008 Annual Report

  • Page 2
    Unemployment 100 80 60 40 20 0 100 80 60 40 20 0 Foreclosure '04 '05 '06 '07 '08 '09 '04 '05 '06 '07 '08 '09 We are all in uncharted waters. - CEO Eric Schmidt Query volume index for "unemployment" and "foreclosure" from Google Trends

  • Page 3
    ... number of people who use Google's services every day is now in the hundreds of millions. More importantly, billions of people now have access to the Internet via computers and mobile phones. Like many other web companies, the vast majority of our services are available worldwide and free to users...

  • Page 4
    ... by which users look for and receive information. While many things have changed, the basic structure of Google search results today is fairly similar to how it was 10 years ago. This is partly because of the benefit of simplicity; in fact, the Google home page has become increasingly simple over...

  • Page 5
    ... Earth and Neil Armstrong landing on the moon. Integrating images into search remains a challenge, primarily because we are so reliant on the surrounding text to gauge a picture's relevance. In the future, using enhanced computer vision technology, we hope to be able to understand what's depicted...

  • Page 6
    ... out of a store with a small box in my hand that stores more than all those drives and cost about $100. Similarly, the processors available today are about 100 times as powerful as those we used in 1998. Google has fully integrated the past 20 years of Usenet archives into Google Groups, which now...

  • Page 7
    ... books using a jury-rigged contraption in our office. By 2003, we launched Google Print, now called Google Book Search. Today, we are able to search the full text of almost 10 million books. Moreover, in October we reached a landmark agreement with a broad class of authors and publishers, including...

  • Page 8
    ... directly from users. After the launch of Google Map Maker in Pakistan, users mapped 25,000 kilometers of uncharted road in just two months. We always believed that we could have an advertising system that would add value not only to our bottom line but also to the quality of our search result pages...

  • Page 9
    ... the desktop that I am back to using now. In fact, today I have worked on this document using three different operating systems and two different web browsers, all without any special software or complex logistics. In addition to Gmail and Google Docs, the Google Apps suite of products now includes...

  • Page 10
    ... survey data from within the enterprise - a critical feature for collecting internal feedback we use extensively when "dogfooding" all of our products. There are a number of things we could improve about these web services. For example, since they have arisen from different groups and acquisitions...

  • Page 11
    ... adoption of HTML 5 on mobile platforms have helped, it is still very difficult to provide a service to the largest group of network-connected people in the world. We acquired the startup Android in 2005 and set about the ambitious goal of creating a new mobile operating system that would allow open...

  • Page 12
    ... the people in the world are online today via computers and mobile phones, the Internet will reach billions more in the coming decade. I expect that by using simple yet powerful models of computing such as web services, everyone will be more productive. These tools enable individuals, small groups...

  • Page 13
    ... Parkway Mountain View, CA 94043 (Address of principal executive offices) (650) 253-0000 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Name of Exchange on Which Registered Class A Common Stock, $0.001 par value...

  • Page 14

  • Page 15
    ...Properties ...Legal Proceedings ...Submission of Matters to a Vote of Security Holders ...Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities ...Selected Financial Data ...Management's Discussion and Analysis of Financial Condition and Results...

  • Page 16

  • Page 17
    ... online advertising. Businesses use our AdWords program to promote their products and services with targeted advertising. In addition, the thousands of third-party web sites that comprise the Google Network use our AdSense program to deliver relevant ads that generate revenue and enhance the user...

  • Page 18
    ... ads that they do not find helpful. Multiple Access Platforms. The mobile phone is the primary way that many people around the world access the internet. We have continued to invest in improving mobile search and have introduced applications that allow users to access search, email, maps, directions...

  • Page 19
    ...Video, Book, Blogs, and Groups Information-Users are often best served by different types of results. When relevant, we also search display results from other Google products including Google News, Google Finance, Google Maps, Google Image Search, Google Video, Google Book Search, Google Blog Search...

  • Page 20
    ... build customized search engines. These customized search engines allow the communities to help improve the quality of search results by labeling and annotating relevant web pages or by creating specialized, subscribed links for users to get more detailed information about a particular topic. Google...

  • Page 21
    ... Pack is a free collection of safe, useful software programs from Google and other companies that improve the user experience online and on the desktop. It includes programs that help users browse the web faster, remove spyware and viruses. Picasa. Picasa is a free service that allows users to view...

  • Page 22
    ... floors. Google Maps. Google Maps helps people navigate map information. Users can look up addresses, search for businesses, and get point-to-point driving directions-all plotted on an interactive street map or on satellite imagery. Google Maps includes StreetView, 360-degree street-level imagery...

  • Page 23
    ... from stories linked to Google News, and Google Audio Indexing, a new technology that allow users to find spoken words inside videos and jump to the right portion of the video where these words are spoken. The Technology Behind Search and Our User Products and Services Our web search technology uses...

  • Page 24
    ...market their products and services to consumers and business users over the internet, we offer Google AdWords, an auction-based advertising program that lets advertisers deliver relevant ads targeted to search queries or web content across Google sites and through the web sites of our Google Network...

  • Page 25
    ... business and for users. Our Google AdSense program enables web sites that are part of the Google Network to deliver AdWords ads that are relevant to the search results or content on their pages. It also allows offline media companies, such as television and radio stations, to deliver ads and audio...

  • Page 26
    ...visitors click on or view these ads. Because we also offer to license our web search technology along with Google AdSense for search, companies without their own search service can offer Google Web Search to improve the usefulness of their web sites for their users while increasing their revenue. We...

  • Page 27
    ... from users typing generic terms into browsers or search to generate revenue from relevant advertising. AdSense for feeds is a free program that allows publishers to monetize their feeds-usersubscribable content streams containing structured data such as stock and financial information, web blog...

  • Page 28
    ...of textual content, such as email messages and Google Groups postings. For example, our technology can serve ads offering tickets to fans of a specific sports team on a news story about that team. Our display advertising programs provide advertisers and publishers services related to the delivery of...

  • Page 29
    ...ad sales cycle and helps maximize the value of publisher content. The key technologies included in this platform are: • The DART Ad Serving Platform. DART for Publishers is our hosted ad serving platform and DART Enterprise is our licensed software solution. Both provide tools to manage digital ad...

  • Page 30
    ...65 offices in over 30 countries, the large majority of which includes sales people. We deploy specialized sales teams across vertical markets. We bring businesses into our advertising network through both online and direct sales channels. We work to use technology and automation wherever possible to...

  • Page 31
    ... trying to attract users to their web sites to search for information about products and services. We also provide a number of online products and services, including Gmail, YouTube, and Google Docs, that compete directly with new and established companies that offer communication, information, and...

  • Page 32
    ... affect companies conducting business on the internet. In addition, laws and regulations relating to user privacy, freedom of expression, content, advertising, information security and intellectual property rights are being debated and considered for adoption by many countries throughout the world...

  • Page 33
    ...of each year. These seasonal trends have caused and will likely continue to cause, fluctuations in our quarterly results, including fluctuations in sequential revenue growth rates. Available Information Our web site is located at www.google.com, and our investor relations web site is located at http...

  • Page 34
    ... trying to attract users to their web sites to search for information about products and services. We also provide a number of online products and services, including Gmail, YouTube, and Google Docs, that compete directly with new and established companies that offer communication, information, and...

  • Page 35
    ... web search, advertising services, and internet companies have greater brand recognition, more users, and more search traffic than we have. Even in countries where we have a significant user following, we may not be as successful in generating advertising revenue due to slower market development...

  • Page 36
    ... competitive, and our revenues and operating results could suffer. Our success depends on providing products and services that make using the internet a more useful and enjoyable experience for our users. Our competitors are constantly developing innovations in web search, online advertising and web...

  • Page 37
    ... paying us for previously purchased products and services. In addition, if consumer spending continues to decrease, this may result in fewer clicks on our advertisers' ads displayed on our web sites and our Google Network members' web sites. Finally, if the banking system or the financial markets...

  • Page 38
    ... of controls, procedures and policies at the acquired company. Diversion of management time and focus from operating our business to acquisition integration challenges. Coordination of product, engineering and sales and marketing functions. Transition of operations, users and customers onto...

  • Page 39
    ... to offer our products and services to one or more countries, and could also materially damage our reputation, our brand, our international expansion efforts, our ability to attract and retain employees, our business and our operating results. Our intellectual property rights are valuable, and...

  • Page 40
    ... also had copyright claims filed against us by companies alleging that features of certain of our products and services, including Google Web Search, Google News, Google Video, Google Image Search, Google Book Search, and YouTube, infringe their rights. In the U.S. we announced a settlement with the...

  • Page 41
    ...nearly all of our products and services are web based, the amount of data we store for our users on our servers (including personal information) has been increasing. Any systems failure or compromise of our security that results in the release of our users' data could seriously limit the adoption of...

  • Page 42
    ... web search technology, products or operating systems developed for these devices, our business could be adversely affected. The number of people who access the internet through devices other than personal computers, including mobile telephones, personal digital assistants (PDAs), smart phones and...

  • Page 43
    ... upon the continued service of key members of our senior management team. In particular, our CEO, Eric Schmidt, and our founders, Larry Page and Sergey Brin, are critical to the overall management of Google as well as the development of our technology, our culture and our strategic direction. All of...

  • Page 44
    ... and Google Network members. Cost increases, loss of traffic or failure to accommodate new technologies or changing business requirements could harm our operating results and financial condition. We rely on bandwidth providers, data centers and others in providing products and services to our users...

  • Page 45
    ...for financial reasons or other unanticipated problems at our data centers could result in lengthy interruptions in our service. Our business depends on increasing use of the internet by users searching for information, advertisers marketing products and services and web sites seeking to earn revenue...

  • Page 46
    ...-upon service levels, our operations could be disrupted resulting in advertiser, partner or employee dissatisfaction. In addition, our business, reputation and operating results could be adversely affected. To the extent our revenues are paid in foreign currencies, and currency exchange rates become...

  • Page 47
    ... stock by us or by our stockholders. Short sales, hedging and other derivative transactions on shares of our Class A common stock (including derivative transactions under our Transferable Stock Option (TSO) program). In addition, the stock market in general, and the market for technology companies...

  • Page 48
    ... sale of our company or its assets, for the foreseeable future. This concentrated control limits our stockholders' ability to influence corporate matters and, as a result, we may take actions that our stockholders do not view as beneficial. As a result, the market price of our Class A common stock...

  • Page 49
    ... of our products, services and brand" and "We are, and may in the future be, subject to intellectual property rights claims, which are costly to defend, could require us to pay damages and could limit our ability to use certain technologies in the future" in Part I, Item 1A of this Annual Report on...

  • Page 50
    ..., 2004. Prior to that time, there was no public market for our stock. The following table sets forth for the indicated periods the high and low sales prices per share for our Class A common stock on The Nasdaq Global Select Market. Fiscal Year 2008 Quarters Ended: High Low March 31, 2008 ...June 30...

  • Page 51
    ...8 /0 8 8/ Google Inc. NASDAQ Composite S&P 500 RDG Internet Composite *$100 invested on 8/19/04 in stock & 7/31/04 in index-including reinvestment of dividends. Fiscal year ending December 31. Copyright © 2009 S&P, a division of The McGraw-Hill Companies Inc. All rights reserved. The stock price...

  • Page 52
    ... method and then selling the underlying shares. The following table provides information with respect to sales by our employees of TSOs during the three-month period ended December 31, 2008: Aggregate Amounts Number of Shares Sale Underlying Price of TSO TSOs Sold TSOs Sold Premium (2) (in thousands...

  • Page 53
    ... of the results to be expected in any future period. 2004 Year Ended December 31, 2005 2006 2007 (in thousands, except per share amounts) 2008 Consolidated Statements of Income Data: Revenues ...Costs and expenses: Cost of revenues ...Research and development ...Sales and marketing ...General and...

  • Page 54
    ... our business; that growth in advertising revenues from our web sites will continue to exceed that from our Google Network members' web sites; regarding our future stock-based compensation charges including charges related to our employee stock options exchange program; regarding the structure and...

  • Page 55
    ...technology and the license of our search solutions to enterprises. Google AdWords is our automated online program that enables advertisers to place targeted text-based and display ads on our web sites and our Google Network members' web sites. Most of our AdWords customers pay us on a cost-per-click...

  • Page 56
    ... web sites). For our online AdSense program, our advertisers pay us a fee each time a user clicks on one of our advertisers' ads displayed on our Google Network members' web sites or, for those advertisers who choose our cost-per-impression pricing, as their ads are displayed. To date, we have paid...

  • Page 57
    ... year. These seasonal trends have caused and will likely continue to cause, fluctuations in our quarterly results, including fluctuations in sequential revenue and paid click growth rates. The operating margin we realize on revenues generated from ads placed on our Google Network members' web sites...

  • Page 58
    ... markets results largely from increased acceptance of our advertising programs, increases in our direct sales resources and customer support operations and our continued progress in developing localized versions of our products in these international markets, as well as an increase in the value...

  • Page 59
    ...the periods indicated: Year Ended December 31, 2006 2007 2008 Three Months Ended September 30, December 31, 2008 2008 (unaudited) Consolidated Statements of Income Data: Revenues ...Costs and expenses: Cost of revenues ...Research and development ...Sales and marketing ...General and administrative...

  • Page 60
    ... and Google Network members' web sites resulted primarily from an increase in the number of paid clicks through our advertising programs. Improvements in our ability to ultimately monetize increased traffic primarily relate to enhancing the end user experience, including providing end users with ads...

  • Page 61
    ... foreign exchange risk management program. The annual growth in international revenues resulted largely from increased acceptance of our advertising programs and increases in our direct sales resources and customer support operations in international markets and our continued progress in developing...

  • Page 62
    ... members and distribution partners. Certain AdSense agreements obligate us to make guaranteed minimum revenue share payments to Google Network members based on their achieving defined performance terms, such as number of search queries or advertisements displayed. These fees may be paid in advance...

  • Page 63
    ... related to an increase in data center costs of $27.8 million as a result of the depreciation of additional information technology assets and data center buildings. This decrease in traffic acquisition costs was primarily a result of more revenues realized from Google Network members to whom we pay...

  • Page 64
    ... and the related revenues generated, including whether we share with certain existing and new distribution partners proportionately more of the aggregate advertising fees that we earn from paid clicks derived from search queries these partners direct to our web sites. • • Research and...

  • Page 65
    ... revenues ... $849.5 $1,461.3 $1,946.2 8.0% 8.8% 8.9% $508.8 9.2% $506.0 8.9% Sales and marketing expenses consist primarily of compensation and related costs for personnel engaged in customer service, sales, and sales support functions, as well as advertising and promotional expenditures. Sales...

  • Page 66
    ... $523.3 million from the year ended December 31, 2007 to the year ended December 31, 2008. This increase was primarily related to an increase in professional services of $243.0 million, the majority of which were related to legal costs, including the aforementioned legal settlement with the Authors...

  • Page 67
    ... $355.0 million related to our investments in America Online, Inc. (AOL) and Clearwire Corporation (Clearwire). See Note 3 of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K. Interest Income and Other, Net Interest income and other, net increased $48.7 million...

  • Page 68
    ... under our foreign exchange risk management program in a legal entity where we have a higher statutory tax rate and greater net losses recognized on the related hedged transactions in legal entities where we have lower statutory tax rates. These increases were partially offset as a result of the...

  • Page 69
    ...of the federal statutory income tax rate to our effective tax rate is set forth in Note 14 of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K. Quarterly Results of Operations You should read the following tables presenting our quarterly results of operations in...

  • Page 70
    ... of the U.S. government and its agencies, municipalities in the U.S., time deposits, money market mutual funds and U.S. corporate securities. Note 3 of Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K describes further the composition of our cash, cash...

  • Page 71
    ...direct result of the growth of our business and increases in headcount. These increases to working capital activities were partially offset by an increase of $837.2 million in accounts receivable due to the growth in fees billed to our advertisers and an increase of $298.7 million in prepaid revenue...

  • Page 72
    ... of information technology assets. In order to manage expected increases in internet traffic, advertising transactions and new products and services, and to support our overall global business expansion, we will make significant investments in data center operations, technology, corporate facilities...

  • Page 73
    ... data centers throughout the world with original lease periods expiring between 2009 and 2063. We are committed to pay a portion of the related operating expenses under certain of these lease agreements. These operating expenses are not included in the table above. Certain of these leases have free...

  • Page 74
    ... to make a reasonably reliable estimate of the timing of payments in individual years beyond 12 months due to uncertainties in the timing of tax audit outcomes. As a result, this amount is not included in the table above. Off-Balance Sheet Entities At December 31, 2007 and 2008, we did not have...

  • Page 75
    statutory tax rates. Our effective tax rate could also fluctuate due to the net gains and losses recognized by legal entities on certain hedges and related hedged intercompany and other transactions under our foreign exchange risk management program, changes in the valuation of our deferred tax ...

  • Page 76
    ... RISK We are exposed to financial market risks, including changes in currency exchange rates and interest rates. Foreign Exchange Risk Economic Exposure We transact business in various foreign currencies and have significant international revenues as well as costs denominated in foreign currencies...

  • Page 77
    ...deposits, money market mutual funds and corporate securities. By policy, we limit the amount of credit exposure to any one issuer. Investments in both fixed rate and floating rate interest earning securities carry a degree of interest rate risk. Fixed rate securities may have their fair market value...

  • Page 78
    ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Google Inc. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Contents Page Reports of Independent Registered Public Accounting Firm ...Financial Statements Consolidated Balance Sheets ...Consolidated Statements of Income ...Consolidated Statements of ...

  • Page 79
    ...PUBLIC ACCOUNTING FIRM The Board of Directors and Stockholders Google Inc. We have audited the accompanying consolidated balance sheets of Google Inc. as of December 31, 2007 and 2008, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the three years...

  • Page 80
    ... the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Google Inc. as of December 31, 2007 and 2008, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended...

  • Page 81
    Google Inc. CONSOLIDATED BALANCE SHEETS (In thousands, except par value per share) As of December 31, 2007 2008 Assets Current assets: Cash and cash equivalents ...Marketable securities ...Accounts receivable, net of allowance of $32,887 and $80,086 ...Deferred income taxes, net ...Income taxes ...

  • Page 82
    Google Inc. CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts) 2006 Year Ended December 31, 2007 2008 Revenues ...Costs and expenses: Cost of revenues (including stock-based compensation expense of $17,629, $22,335, $41,340) ...Research and development (including stock-based...

  • Page 83
    Google Inc. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (In thousands) Class A and Class B Common Stock Shares Amount Additional Paid-In Capital Accumulated Deferred Other Stock-Based Comprehensive Compensation Income Total Stockholders' Equity Retained Earnings Balance at January 1, 2006 ......

  • Page 84
    ... of exchange rate changes on cash and cash equivalents ...Net increase (decrease) in cash and cash equivalents ...Cash and cash equivalents at beginning of year ...Cash and cash equivalents at end of year ...Supplemental disclosures of cash flow information Cash paid for interest ...Cash paid for...

  • Page 85
    ... is our automated online program that enables advertisers to place targeted text-based and display ads on our web sites and our Google Network members' web sites. Most of our AdWords customers pay us on a cost-per-click basis, which means that an advertiser pays us only when a user clicks on one of...

  • Page 86
    ... participate in these programs to be members of our Google Network. In 2008 we acquired DoubleClick, a company that offers online ad serving and management services to advertisers, ad agencies and web site publishers. Fees derived from hosted, or web-based applications are recognized as licensing...

  • Page 87
    Google Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) otherwise direct search queries to our web site (collectively referred to as distribution arrangements). These amounts are primarily based on the revenue share arrangements with our Google Network members and distribution partners. ...

  • Page 88
    ... Employees for Acquiring, or in Conjunction with Selling, Goods or Services (EITF 96-18). Under SFAS 123R and EITF 96-18, we use the BSM method to measure the value of options granted to non-employees at each vesting date to determine the appropriate charge to stock-based compensation. In the years...

  • Page 89
    ... TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) No advertiser or Google Network member generated greater than 10% of revenues in 2006, 2007 and 2008. Fair Value of Financial Instruments The carrying amounts of our financial instruments, including cash and cash equivalents, marketable securities...

  • Page 90
    ... to be Sold, Leased, or Otherwise Marketed and Statement of Position No. 98-1, Accounting for Costs of Computer Software Developed or Obtained for Internal Use. We have determined that technological feasibility for our products to be marketed to external users was reached shortly before the release...

  • Page 91
    ... 141R on our consolidated financial position, results of operations will largely be dependent on the size and nature of the business combinations completed after the adoption of this statement. In December 2007, the FASB issued SFAS 160. SFAS 160 establishes accounting and reporting standards for...

  • Page 92
    ... respect to voting. Further, there are a number of safeguards built into our Certificate of Incorporation, as well as Delaware law, which preclude our board of directors from declaring or paying unequal per share dividends on our Class A and Class B common stock. Specifically, Delaware law provides...

  • Page 93
    Google Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) The following table sets forth the computation of basic and diluted net income per share of Class A and Class B common stock (in thousands, except per share amounts): 2006 Class A Class B Year Ended December 31, 2007 Class A Class B ...

  • Page 94
    Google Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) The net income per share amounts are the same for Class A and Class B because the holders of each class are legally entitled to equal per share distributions whether through dividends or in liquidation. Note 3. Cash and Investments ...

  • Page 95
    Google Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) As of December 31, 2008 Gross Gross Unrealized Unrealized Gains Losses Adjusted Cost Fair Value U.S. government agencies ...Municipal securities ...Money market mutual funds ...Corporate debt securities ...Total marketable ...

  • Page 96
    Google Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) In accordance with EITF Issue No. 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments, the following table shows gross unrealized losses and fair value for those investments that were in an...

  • Page 97
    ... on the balance sheet at fair value. Changes in the fair value (i.e., gains or losses) of the derivatives are recorded in the accompanying Consolidated Statements of Income as interest income and other, net, or as part of revenues, or on the accompanying Consolidated Balance Sheets as accumulated...

  • Page 98
    Google Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) initially reported as a component of accumulated other comprehensive income and subsequently reclassified to revenues when the hedged exposure affects revenues or as interest income and other, net, if the hedged transaction becomes ...

  • Page 99
    ... within Level 2 as the valuation inputs are based on quoted prices and market observable data of similar instruments. Assets and liabilities measured at fair value on a recurring basis are summarized below (in thousands): Fair value measurement at reporting date using Quoted Prices in Active...

  • Page 100
    ... 2008, we acquired Click Holding Corp. (DoubleClick), a company that offers online ad serving and management services to advertisers, ad agencies and web site publishers. We acquired DoubleClick primarily for their customer relationships, as well as patents and developed technology. This transaction...

  • Page 101
    ...NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) business combination. In August 2008, we sold the search marketing business of Performics, a division of DoubleClick, for approximately $53 million paid in cash. As the sale of Performics was planned at the time of the acquisition of DoubleClick...

  • Page 102
    ... $996,690 Patents and developed technology, customer relationships, and tradenames and other have weighted average useful lives from the date of purchase of 4.0 years, 6.4 years and 4.9 years. Amortization expense of acquisition-related intangible assets for the years ended December 31, 2006, 2007...

  • Page 103
    ... FINANCIAL STATEMENTS-(Continued) Note 9. Interest Income and Other, Net The components of interest income and other, net were as follows (in thousands): Year Ended December 31, 2006 2007 2008 Interest income ...Realized gains on marketable securities, net ...Foreign exchange gains (losses...

  • Page 104
    ... In the normal course of business to facilitate transactions of our services and products, we indemnify certain parties, including advertisers, Google Network members and lessors, with respect to certain matters. We have agreed to hold certain parties harmless against losses arising from a breach of...

  • Page 105
    ... of our products and services, including Google Web Search, Google News, Google Video, Google Image Search, Google Book Search and YouTube, infringe their rights. Adverse results in these lawsuits may include awards of substantial monetary damages, costly royalty or licensing agreements or orders...

  • Page 106
    ... on the employee's performance. RSUs under the Founders' Award programs are issued to individuals on teams that have made extraordinary contributions to Google. These awards vest quarterly over four years contingent upon employment with us on the dates of vest. We estimated the fair value of each...

  • Page 107
    Google Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) employees. The risk-free interest rate for periods within the contractual life of the award is based on the U.S. Treasury yield curve in effect at the time of grant. The following table presents the weighted average assumptions used ...

  • Page 108
    ... do not include the aggregate sales price of options sold under our TSO program. During 2008, the number of shares underlying TSOs sold to selected financial institutions under the TSO program was 605,113 at a total value of $149.4 million, or an average of $246.90 per share, and an average premium...

  • Page 109
    Google Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Note 13. 401(k) Plan We have a 401(k) Savings Plan (401(k) Plan) that qualifies as a deferred salary arrangement under Section 401(k) of the Internal Revenue Code. Under the 401(k) Plan, participating employees may elect to ...

  • Page 110
    ... will begin to expire in 2011. The net operating loss carryforwards are subject to various limitations under Section 382 of the Internal Revenue Code. On October 3, 2008, the United States enacted a law, the "Emergency Economic Stabilization Act of 2008," which contains the "Tax Extenders...

  • Page 111
    ... statements. Note 15. Information about Geographic Areas Our chief operating decision-makers (i.e., chief executive officer, certain of his direct reports and our founders) review financial information presented on a consolidated basis, accompanied by disaggregated information about revenues...

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    ... below the consolidated unit level. Accordingly, we consider ourselves to be in a single reporting segment and operating unit structure. Revenues by geography are based on the billing address of the advertiser. The following table sets forth revenues and long-lived assets by geographic area (in...

  • Page 113
    ... and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. (b) Changes in internal control over financial reporting. We regularly review our system of internal control over financial...

  • Page 114
    ...internet software and services company. Prior to Netscape, he held positions in business development, product management and marketing at The 3DO Company, a video game company, Go Corporation, a developer of software for mobile devices, and HewlettPackard, a provider of technology products, software...

  • Page 115
    ... as Chief Financial Officer of SmartForce, an educational software applications company. Prior to that, David was a partner at the law firm of Wilson Sonsini Goodrich & Rosati. David holds a J.D. from Stanford University and a Bachelor of Arts degree in history from Santa Clara University. Patrick...

  • Page 116
    ... and Related Transactions" and "Corporate Governance-Independence of Directors" in the 2009 Proxy Statement and is incorporated herein by reference. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES The information required by this item is included under the caption "Independent Public Accountants...

  • Page 117
    ... of this Annual Report on Form 10-K: 1. Consolidated Financial Statements Reports of Independent Registered Public Accounting Firm ...Financial Statements Consolidated Balance Sheets ...Consolidated Statements of Income ...Consolidated Statements of Stockholders' Equity ...Consolidated Statements of...

  • Page 118
    ...Signature Title Date /S/ ERIC E. SCHMIDT Eric E. Schmidt Chairman of the Board of Directors and Chief Executive Officer (Principal Executive Officer) Chief Financial Officer (Principal Financial and Accounting Officer) President of Technology, Assistant Secretary and Director President of Products...

  • Page 119
    ... 2004 Investor Rights Agreement dated May 31, 2002 Amendment to Investor Rights Agreement dated August 17, 2004 Specimen Class A Common Stock certificate Specimen Class B Common Stock certificate Registration Rights Agreement dated October 9, 2006 (with stockholders of YouTube, Inc.) Current Report...

  • Page 120
    ... Stock Plan, as amended 2004 Stock Plan-Form of stock option agreement 2004 Stock Plan-Form of restricted stock unit agreement Current Report on Form 8-K (File No. 000-50726) April 23, 2007 4.05.1 Quarterly Report on Form 10-Q (File No. 000-50726) August 9, 2007 10.01 Registration Statement...

  • Page 121
    ... Inc. and Shirley Tilghman dated August 16, 2005. Click Holding Corp. 2005 Stock Incentive Plan Offer Letter between Google Inc. and Patrick Pichette dated June 6, 2008 List of Subsidiaries of Registrant Consent of Independent Registered Public Accounting Firm Current Report on Form 8-K (File No...

  • Page 122
    Exhibit Number Description Incorporated by reference herein Form Date 24.01 * Power of Attorney (incorporated by reference to the signature page of this Annual Report on Form 10-K) Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a14(a) and 15d-14(a), as adopted ...

  • Page 123
    ... information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal...

  • Page 124
    ... information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal...

  • Page 125
    ... 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in this Annual Report on Form 10-K fairly presents in all material respects the financial condition and results of operations of Google Inc. By: /S/ ERIC E. SCHMIDT Name: Eric E. Schmidt Title: Chairman of the...

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    ...-looking statements within the meaning of the federal securities laws. These forward-looking statements include, but are not limited to, statements related to improvements to our search engine, our advertising systems, and our web services and the expected increase in the number of mobile searches...

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