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Google Ventures into Healthcare

Zacks Equity Research

Google Inc (GOOG) recently announced the launch of a healthcare company, Calico, one of its many investments in areas outside its core Internet search business. This ambitious venture will focus on aging and related diseases.

Calico will be led by Arthur Levinson, ex-Google board member and currently Apple’s (AAPL) chairman. Google did not provide specific details about the project, stating that it is still in a nascent stage.

Google has invested in many potentially promising projects, such as driverless cars and wearable computers called Google Glass. Most of its ventures have revolved around its familiar territory of search, software and hardware. However, not all investments have yielded good results. One of its earlier ventures, Google Health, which aimed at developing a system for storing digital medical records was shut down soon after launch.

Though Google did not disclose the amount of capital it has invested in the project, close sources have said that the amount was significant, while management stated that it was not huge compared to its annual turnover (roughly $50 billion last year).

These investments have not distracted management in the past and the core business continues to grow very strongly. Therefore, this investment should not either.  

Google recorded a profit of $3.23 billion or $9.54 a share in the second quarter of 2013, up from $2.79 billion or $8.42 a share in the year-ago period. Total revenue grew to $14.11 billion, up about 19% year over year.

Currently, Google Inc has a Zacks Rank #3 (Hold). Investors can also consider Yahoo Inc (YHOO), and Facebook Inc (FB), both of which carry a Zacks Rank # 2 (Buy)

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