Google's Trading Floor
Google's Trading FloorJun 02 2010 - Google - Farhad Divecha
Google has so far managed their vast cash reserves in a very traditional manner. BusinessWeek reports that Google might now have decided to be more aggressive with their investments.
The search company has now started its own trading floor, to manage their internal cash reserve of around $26.5 billion.
Considering the size of the cash reserve, it seems like a very prudent decision, as they are now likely to earn higher and faster returns.
Initially, Google will use part of this money to buy back shares which they had surrendered to acquire AdMob. This transaction has already been given the green signal by the concerned U.S. authorities. However, Google has not yet specified what else they intend to do with the money.
The trading floor which was started in January 2010, and the investment team which had only 6 members 3 years ago, now has over 30 members. Some members in this team have had experience in such financial institutions as J P Morgan Chase and Goldman Sachs etc.
The head of the team Brent Callinicos has been with Google since 2007, when he left Microsoft. Since then Google’s cash reserves have steadily risen from $11 billion to the present level.
The trading floor is located in the company head quarters itself. It is a very well equipped state-of-the-art set up from which the staff can operate in comfort.
Brent Callinicos has made good use of the software engineers available at Google to build special software through which their complex operations can be monitored and easily accessed.
This software allows them to monitor 98% of their holdings in real-time, while most institutions can monitor only 60 to 70% of their positions in real-time.
Callinicos has now decided to go in for a high risk, high return style of investment. The corporate debt securities have gone up from $695 million a year ago to $4.9 billion on March 31. Agency residential mortgage backed securities have also risen from $60 million to $3.3 billion in the same period.
Google is still in the process of adding specially qualified members tot heir team, and though it is believed that the search specialist does not pay as well as some other financial institutions, the stability that the company offers can be a big incentive in turbulent economic times.
CEO, Eric Schmidt, has said that Google is not giving out dividends in the near future as they will hold on to their reserves for mergers and acquisitions at the opportune moment.