Google 10-Q 5 May 10 2010 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information
	3 Months Ended Mar. 31, 2010	Apr. 30, 2010 Class A common stock	Apr. 30, 2010 Class B common stock
Document Type	10-Q
Amendment Flag	false
Document Period End Date	2010-03-31
Document Fiscal Year Focus	2,010
Document Fiscal Period Focus	Q1
Trading Symbol	GOOG
Entity Registrant Name	Google Inc.
Entity Central Index Key	0001288776
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		245,600,411	72,886,098

CONSOLIDATED BALANCE SHEETS

CONSOLIDATED BALANCE SHEETS (USD $)
In Millions	Mar. 31, 2010	Dec. 31, 2009
Current assets:
Cash and cash equivalents	$9,192	$10,198
Marketable securities	17,322	14,287
Accounts receivable, net of allowance of $79 and $62	3,084	3,178
Deferred income taxes, net	399	644
Income taxes receivable, net		23
Prepaid revenue share, expenses and other assets	1,135	837
Total current assets	31,132	29,167
Prepaid revenue share, expenses and other assets, non-current	454	415
Deferred income taxes, net, non-current	446	263
Non-marketable equity securities	154	129
Property and equipment, net	4,773	4,845
Intangible assets, net	790	775
Goodwill	5,122	4,903
Total assets	42,871	40,497
Current liabilities:
Accounts payable	329	216
Accrued compensation and benefits	578	982
Accrued expenses and other current liabilities	576	570
Accrued revenue share	696	694
Deferred revenue	293	285
Income taxes payable, net	450
Total current liabilities	2,922	2,747
Deferred revenue, non-current	36	42
Income taxes payable, net, non-current	1,300	1,392
Other long-term liabilities	330	312
Stockholders' equity:
Convertible preferred stock, $0.001 par value, 100,000 shares authorized; no shares issued and outstanding
Common stock and additional paid-in capital	16,171	15,817
Accumulated other comprehensive income	163	105
Retained earnings	21,949	20,082
Total stockholders' equity	38,283	36,004
Total liabilities and stockholders' equity	$42,871	$40,497

CONSOLIDATED BALANCE SHEETS (Pa

CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
Share data in Thousands	Mar. 31, 2010	Dec. 31, 2009
Accounts receivable, allowance	$62,000,000	$79,000,000
Convertible preferred stock, par value per share	0.001	0.001
Convertible preferred stock, shares authorized	100,000	100,000
Convertible preferred stock, shares issued	0	0
Convertible preferred stock, shares outstanding	0	0
Class A and Class B common stock, par value per share	0.001	0.001
Class A and Class B common stock, shares authorized	9,000,000	9,000,000
Common stock, par value	318,000	318,000
Common stock, shares issued	318,274	317,772
Common stock, shares outstanding	318,274	317,772
Class A common stock
Common stock, par value	245,000	244,000
Common stock, shares issued	244,843	243,611
Common stock, shares outstanding	244,843	243,611
Class B common stock
Common stock, par value	$73,000	$74,000
Common stock, shares issued	73,431	74,161
Common stock, shares outstanding	73,431	74,161

CONSOLIDATED STATEMENTS OF INCO

CONSOLIDATED STATEMENTS OF INCOME (USD $)
In Millions, except Per Share data	3 Months Ended Mar. 31, 2010	3 Months Ended Mar. 31, 2009
Revenues	$6,775	$5,509
Costs and expenses:
Cost of revenues (including stock-based compensation expense of $13 and $6)	2,452	2,102
Research and development (including stock-based compensation expense of $168 and $191)	818	642
Sales and marketing (including stock-based compensation expense of $59 and $54)	607	434
General and administrative (including stock-based compensation expense of $37 and $40)	410	447
Total costs and expenses	4,287	3,625
Income from operations	2,488	1,884
Interest income and other, net	18	6
Income before income taxes	2,506	1,890
Provision for income taxes	551	467
Net income	$1,955	$1,423
Net income per share of Class A and Class B common stock:
Basic	6.15	4.51
Diluted	6.06	4.49

1_CONSOLIDATED STATEMENTS OF IN

CONSOLIDATED STATEMENTS OF INCOME (Parenthetical) (USD $)
In Millions	3 Months Ended Mar. 31, 2010	3 Months Ended Mar. 31, 2009
Cost of revenues, stock-based compensation expense	$6	$13
Research and development, stock-based compensation expense	191	168
Sales and marketing, stock-based compensation expense	54	59
General and administrative, stock-based compensation expense	$40	$37

CONSOLIDATED STATEMENTS OF CASH

CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Millions	3 Months Ended Mar. 31, 2010	3 Months Ended Mar. 31, 2009
Operating activities
Net income	$1,955	$1,423
Adjustments:
Depreciation and amortization of property and equipment	264	321
Amortization of intangibles and other assets	67	82
Stock-based compensation expense	291	277
Excess tax benefits from stock-based award activities	(12)	(32)
Deferred income taxes	(13)	(13)
Other	2	(21)
Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable	46	97
Income taxes, net	381	325
Prepaid revenue share, expenses and other assets	(157)	78
Accounts payable	120	22
Accrued expenses and other liabilities	(394)	(322)
Accrued revenue share	23	4
Deferred revenue	11	9
Net cash provided by operating activities	2,584	2,250
Investing activities
Purchases of property and equipment	(239)	(263)
Purchases of marketable securities	(12,487)	(5,245)
Maturities and sales of marketable securities	9,495	5,110
Investments in non-marketable equity securities	(3)	(19)
Acquisitions, net of cash acquired, and purchases of intangible and other assets	(190)	(2)
Net cash used in investing activities	(3,424)	(419)
Financing activities
Net payments related to stock-based award activities	(38)	(37)
Excess tax benefits from stock-based award activities	12	32
Repurchase of common stock in connection with an acquisition	(97)
Net cash used in financing activities	(123)	(5)
Effect of exchange rate changes on cash and cash equivalents	(43)	(57)
Net increase (decrease) in cash and cash equivalents	(1,006)	1,769
Cash and cash equivalents at beginning of year	10,198	8,657
Cash and cash equivalents at end of period	9,192	10,426
Supplemental disclosures of cash flow information
Cash paid for income taxes	179	162
Non-cash financing activity:
Fair value of common stock issued in connection with an acquisition	$95

Google Inc. and Summary of Sign

Google Inc. and Summary of Significant Accounting Policies
	3 Months Ended Mar. 31, 2010
Google Inc. and Summary of Significant Accounting Policies	Note 1. Google Inc. and Summary of Significant Accounting Policies Nature of Operations We were incorporated in California in September 1998. We were re-incorporated in the State of Delaware in August 2003. We provide highly targeted advertising and global internet search solutions as well as hosted applications. Basis of Consolidation The Consolidated Financial Statements include the accounts of Google and our wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated. Unaudited Interim Financial Information The accompanying Consolidated Balance Sheet as of March31, 2010, the Consolidated Statements of Income for the three months ended March31, 2009 and 2010, and the Consolidated Statements of Cash Flows for the three months ended March31, 2009 and 2010 are unaudited. These unaudited interim Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP). In our opinion, the unaudited interim Consolidated Financial Statements include all adjustments of a normal recurring nature necessary for the fair presentation of our financial position as of March31, 2010, our results of operations for the three months ended March31, 2009 and 2010, and our cash flows for the three months ended March31, 2009 and 2010. The results of operations for the three months ended March31, 2010 are not necessarily indicative of the results to be expected for the year ending December31, 2010. These unaudited interim Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and related notes included in our 2009 Annual Report on Form 10-K filed on February12, 2010. Use of Estimates The preparation of interim Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the amounts reported and disclosed in the financial statements and the accompanying notes. Actual results could differ materially from these estimates. On an ongoing basis, we evaluate our estimates, including those related to the accounts receivable and sales allowances, fair values of financial instruments, intangible assets and goodwill, useful lives of intangible assets and property and equipment, fair values of stock-based awards, and income taxes, among others. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Effect of Recent Accounting Pronouncements In October 2009, the Financial Accounting Standards Board (FASB) issued a new accounting standard which provides guidance for arrangements with multiple deliverables. Specifically, the new standard requires an entity to allocate consideration at the inception of an arrangement to all of its deliverables based on their relative selling prices. In the absence of the vendor-specific objective evidence or third-party evidence of the selling prices, consideration must be allocated to the deliverable

Net Income Per Share of Class A

Net Income Per Share of Class A and Class B Common Stock
	3 Months Ended Mar. 31, 2010
Net Income Per Share of Class A and Class B Common Stock	Note 2. Net Income Per Share of ClassA and Class B Common Stock The following table sets forth the computation of basic and diluted net income per share of ClassA and Class B common stock (in millions, except share amounts which are reflected in thousands and per share amounts): For the Three Months Ended March31, 2009 2010 (unaudited) Class A ClassB Class A ClassB Basic net income per share: Numerator: Allocation of undistributed earnings $ 1,085 $ 338 $ 1,501 $ 454 Denominator: Weighted-average common shares outstanding 240,303 74,965 244,099 73,796 Less: Weighted-average unvested common shares subject to repurchase or cancellation (16 ) Number of shares used in per share computation 240,287 74,965 244,099 73,796 Basic net income per share $ 4.51 $ 4.51 $ 6.15 $ 6.15 Diluted net income per share: Numerator: Allocation of undistributed earnings for basic computation $ 1,085 $ 338 $ 1,501 $ 454 Reallocation of undistributed earnings as a result of conversion of Class B to ClassA shares 338 454 Reallocation of undistributed earnings to Class B shares (1 ) (6 ) Allocation of undistributed earnings $ 1,423 $ 337 $ 1,955 $ 448 Denominator: Number of shares used in basic computation 240,287 74,965 244,099 73,796 Weighted-average effect of dilutive securities Add: Conversion of Class B to ClassA common shares outstanding 74,965 73,796 Unvested common shares subject to repurchase or cancellation 16 Employee stock options and warrants under Transferable Stock Option program 1,767 86 3,591 82 Restricted shares and restricted stock units 186 1,122 Number of shares used in per share computation 317,221 75,051 322,608 73,878 Diluted net income per share $ 4.49 $ 4.49 $ 6.06 $ 6.06 The net income per share amounts are the same for ClassA and Class B because the holders of each class are legally entitled to equal per share distributions whether through dividends or in liquidation.

Cash and Investments

Cash and Investments
	3 Months Ended Mar. 31, 2010
Cash and Investments	Note 3. Cash and Investments Cash, cash equivalents, and marketable securities consist of the following (in millions): As of December31, 2009 As of March31, 2010 (unaudited) Cash and cash equivalents: Cash $ 4,303 $ 3,570 Cash equivalents: Time deposits 3,740 2,253 Money market mutual funds 2,153 3,345 U.S. government agencies 2 Corporate debt securities 24 Total cash and cash equivalents 10,198 9,192 Marketable securities: Time deposits 1,250 750 Money market mutual funds 28 5 U.S. government agencies 3,703 3,348 U.S. government notes 2,492 2,184 Foreign government bonds 37 332 Municipal securities 2,130 2,222 Corporate debt securities 2,822 4,885 Agency residential mortgage-backed securities 1,578 3,338 Commercial mortgage-backed securities 48 47 Marketable equity security 199 211 Total marketable securities 14,287 17,322 Total cash, cash equivalents and marketable securities $ 24,485 $ 26,514 The following table summarizes unrealized gains and losses related to our investments in marketable securities designated as available-for-sale (in millions): AsofDecember 31,2009 Adjusted Cost Gross Unrealized Gains Gross Unrealized Losses FairValue Time deposits $ 1,250 $ $ $ 1,250 Money market mutual funds 28 28 U.S. government agencies 3,700 5 (2 ) 3,703 U.S. government notes 2,520 (28 ) 2,492 Foreign government bonds 37 37 Municipal securities 2,100 30 2,130 Corporate debt securities 2,826 13 (17 ) 2,822 Agency residential mortgage-backed securities 1,585 5 (12 ) 1,578 Commercial mortgage-backed securities 47 1 48 Marketable equity security 145 54 199 Total $ 14,238 $ 108 $ (59 ) $ 14,287 AsofMarch 31,2010 Adjusted Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value (unaudited) Time deposits $ 750 $ $ $ 750 Money market mutual funds 5 5 U.S. government agencies 3,350 3 (5 ) 3,348 U.S. government notes 2,197 (13 ) 2,184 Foreign government bonds 328 4 332 Municipal securities 2,203 21 (2 ) 2,222 Corporate debt securities 4,865 38 (18 ) 4,885 Agency residential mortgage-backed securities 3,340 9 (11 ) 3,338 Commercial mortgage-backed securities 47 47 Marketable equity security 145 66 211 Total $ 17,230 $ 141 $ (49 ) $ 17,322 Gross unrealized

Derivative Financial Instrument

Derivative Financial Instruments
	3 Months Ended Mar. 31, 2010
Derivative Financial Instruments	Note4. Derivative Financial Instruments We enter into foreign currency contracts with financial institutions to reduce the risk that our cash flows and earnings will be adversely affected by foreign currency exchange rate fluctuations. Our program is not designated for trading or speculative purposes. We recognize derivative instruments as either assets or liabilities on the balance sheet at fair value. We record changes in the fair value (i.e., gains or losses) of the derivatives in the accompanying Consolidated Statements of Income as interest income and other, net, as part of revenues, or to accumulated other comprehensive income (AOCI) on the accompanying Consolidated Balance Sheets. Cash Flow Hedges We use options designated as cash flow hedges to hedge certain forecasted revenue transactions denominated in currencies other than the U.S. dollar. We initially report any gain on the effective portion of a cash flow hedge as a component of AOCI and subsequently reclassify to revenues when the hedged revenues are recorded or as interest income and other, net, if the hedged transaction becomes probable of not occurring. At March31, 2010, the effective portion of our cash flow hedges before tax effect was $185 million, of which $114 million is expected to be reclassified from AOCI to revenues within the next 12 months. We recognize any gain after a hedge is de-designated or related to an ineffective portion of a hedge in interest income and other, net, immediately. Further, we exclude the change in the time value of the options from our assessment of hedge effectiveness. We record the premium paid or time value of an option whose strike price is equal to or greater than the market price on the date of purchase as an asset. Thereafter, we recognize any change to this time value in interest income and other, net. The notional principal of foreign exchange contracts to purchase U.S. dollars with Euros was 1.6 billion (or approximately $2.2 billion) and 2.4 billion (or approximately $3.3 billion) at December31, 2009 and March31, 2010; the notional principal of foreign exchange contracts to purchase U.S. dollars with British pounds was 809million (or approximately $1.3 billion) and 1.2 billion (or approximately $1.9 billion) at December31, 2009 and March31, 2010; and the notional principal of foreign exchange contracts to purchase U.S. dollars with Canadian dollars was C$306 million (or approximately $268 million) and C$343 million (or approximately $309 million) at December31, 2009 and March31, 2010. These foreign exchange options have maturities of 36 months or less. There were no other foreign exchange contracts designated as cash flow hedges. Fair Value Hedges In November 2009, we began using forward contracts designated as fair value hedges to hedge foreign currency risks for our investments denominated in currencies other than the U.S. dollar. Gains and losses on these contracts are recognized in interest income and other, net along with the offsetting losses and gains of the related hedged items. We exclude changes in the time value for forward contacts from the assessment of hedge effectiveness and recognize th

Fair Value Measurements

Fair Value Measurements
	3 Months Ended Mar. 31, 2010
Fair Value Measurements	Note 5. Fair Value Measurements We measure our cash equivalents, marketable securities, ARS, and foreign currency derivative contracts at fair value. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. A three-tier fair value hierarchy is established as a basis for considering such assumptions and for inputs used in the valuation methodologies in measuring fair value: Level 1Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. Level 2Include other inputs that are directly or indirectly observable in the marketplace. Level 3Unobservable inputs which are supported by little or no market activities. The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. We classify our cash equivalents and marketable securities within Level 1 or Level 2. This is because we value our cash equivalents and marketable securities using quoted market prices or alternative pricing sources and models utilizing market observable inputs. We classify our investments in ARS within Level 3 because they are valued using valuation techniques (see Note 3). Some of the inputs to these models are unobservable in the market and are significant. We classify our foreign currency derivative contracts 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 millions): As of December31, 2009 Fairvaluemeasurementatreportingdateusing Description QuotedPrices inActive Markets forIdenticalAssets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Assets Cash equivalents: Time deposits $ 3,740 $ $ 3,740 $ Money market mutual funds 2,153 2,153 U.S. government agencies 2 2 Marketable securities: Time deposit 1,250 1,250 Money market mutual funds 28 28 U.S. government agencies 3,703 3,703 U.S. government notes 2,492 2,492 Foreign government bonds 37 37 Municipal securities 2,130 2,130 Corporate debt securities 2,822 2,822 Agency residential mortgage-backed securities 1,578 1,578 Commercial mortgage-backed securities 48 48 Marketable equity security 199 199 Foreign currency derivative contracts 105 105 Auction rate securities 182 182 Total $ 20,469 $ 4,844 $ 15,443 $ 182

Property and Equipment

Property and Equipment
	3 Months Ended Mar. 31, 2010
Property and Equipment	Note 6. Property and Equipment Property and equipment consist of the following (in millions): As of December31, 2009 As of March31, 2010 (unaudited) Information technology assets $ 3,868 $ 3,899 Construction in progress 1,644 1,661 Land and buildings 1,907 1,953 Leasehold improvements 646 642 Furniture and fixtures 65 64 Total 8,130 8,219 Less accumulated depreciation and amortization 3,285 3,446 Property and equipment, net $ 4,845 $ 4,773

Acquisitions

Acquisitions
	3 Months Ended Mar. 31, 2010
Acquisitions	Note7. Acquisitions In February 2010, we completed the acquisition of On2 Technologies, Inc. (On2), a publicly-held company and developer of video compression technology. This transaction was accounted for as a business combination. The purchase price was $123 million, consisting of the issuance of approximately 174,000 shares of our ClassA common stock (with a value of $95 million, based on the closing price of our ClassA common stock on February19, 2010) and cash of $28 million. To offset the dilution effect of issuing shares in connection with this acquisition, we also repurchased and subsequently retired 174,000 shares of our ClassA common stock for $97 million pursuant to a Rule 10b5-1 trading plan. The following table summarizes the allocation of the purchase price for On2 (in millions, unaudited): Goodwill $ 115 Patents and developed technology 27 Customer relationships and other 2 Net liabilities assumed (9 ) Deferred tax liabilities (12 ) Total $ 123 During the three months ended, March31, 2010, we also completed nine other acquisitions for a total cash consideration of approximately $145 million. The following table summarizes the allocation of the purchase price for the nine acquisitions (in millions, unaudited): Goodwill $ 107 Patents and developed technology 40 Net assets acquired 6 Deferred tax liabilities (8 ) Total $ 145 For all acquisitions completed during the three months ended March31, 2010, patents and developed technology have a weighted-average useful life of 3.7 years and customer relationships and others have a weighted-average useful life of 2.0 years. Goodwill expected to be deductible for tax purposes is $32 million. In addition, on November9, 2009, we signed a definitive agreement to acquire AdMob, Inc., a privately-held mobile display ads technology provider, for $750 million of our ClassA common stock and cash. The completion of this transaction is subject to customary closing conditions. We expect this transaction to close in the second quarter of 2010.

Goodwill and Other Intangible A

Goodwill and Other Intangible Assets
	3 Months Ended Mar. 31, 2010
Goodwill and Other Intangible Assets	Note 8. Goodwill and Other Intangible Assets The changes in the carrying amount of goodwill for the three months ended March31, 2010 are as follows (in millions, unaudited): Balance as of December31, 2009 $ 4,903 Goodwill acquired 222 Goodwill adjustment (3 ) Balance as of March31, 2010 $ 5,122 Information regarding our acquisition-related intangible assets that are being amortized is as follows (in millions): As of December31, 2009 Gross Carrying Amount Accumulated Amortization Net Carrying Value Patents and developed technology $ 566 $ 380 $ 186 Customer relationships 784 258 526 Tradenames and other 211 148 63 Total $ 1,561 $ 786 $ 775 As of March 31, 2010 Gross Carrying Amount Accumulated Amortization Net Carrying Value (unaudited) Patents and developed technology $ 648 $ 405 $ 243 Customer relationships 786 286 500 Tradenames and other 201 154 47 Total $ 1,635 $ 845 $ 790 Amortization expense of acquisition-related intangible assets for the three months ended March31, 2009 and 2010 was $78 million and $63 million. As of March31, 2010, expected amortization expense for acquisition-related intangible assets for each of the next five years and thereafter is as follows (in millions, unaudited): Remainder of 2010 $ 188 2011 206 2012 159 2013 112 2014 97 2015 18 Thereafter 10 $ 790

Interest Income and Other, Net

Interest Income and Other, Net
	3 Months Ended Mar. 31, 2010
Interest Income and Other, Net	Note9. Interest Income and Other, Net The components of interest income and other, net are as follows (in millions): ThreeMonthsEnded March31, 2009 2010 (unaudited) Interest income $ 66 $ 95 Realized gains on marketable securities, net 32 25 Foreign currency exchange losses, net (91 ) (105 ) Other (1 ) 3 Interest income and other, net $ 6 $ 18

Comprehensive Income

Comprehensive Income
	3 Months Ended Mar. 31, 2010
Comprehensive Income	Note 10. Comprehensive Income The changes in the components of other comprehensive income are as follows (in millions): ThreeMonthsEnded March31, 2009 2010 (unaudited) Net income $ 1,423 $ 1,955 Change in unrealized gains on available-for-sale investments, net of taxes(1) 10 42 Change in foreign currency translation adjustment (58 ) (84 ) Changeinunrealizedgainsoncashflowhedges,netof taxes(2) (10 ) 100 Comprehensive income $ 1,365 $ 2,013 (1) Change in unrealized gains on available-for-sale investments is recorded net of taxes of $1 million and $2 million for the three months ended March31, 2009 and 2010. (2) Change in unrealized gains on cash flow hedges is recorded net of taxes of $7 million and $69 million for the three months ended March31, 2009 and 2010. The components of accumulated other comprehensive income are as follows (in millions): As of December31, 2009 As of March31, 2010 (unaudited) Unrealized net gains on available-for-sale investments, net of taxes $ 13 $ 55 Foreign currency translation adjustment 83 (1 ) Unrealized gains on cash flow hedges, net of taxes 9 109 Accumulated other comprehensive income $ 105 $ 163

Contingencies

Contingencies
	3 Months Ended Mar. 31, 2010
Contingencies	Note 11. Contingencies Legal Matters Companies have filed trademark infringement and related claims against us over the display of ads in response to user queries that include trademark terms. The outcomes of these lawsuits have differed from jurisdiction to jurisdiction. In March 2010, the European Court of Justice issued a decision (with respect to three pending cases that were consolidated into one) that confirmed that we have not infringed trademark law by allowing advertisers to bid for keywords corresponding to their competitors trademarks. We are litigating, or have recently litigated similar issues in other cases, in the U.S., Australia, Austria, Brazil, Chile, China, France, Germany, Israel, Italy, Taiwan, and the United Kingdom. We also have had copyright claims filed against us 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. Adverse results in these lawsuits may include awards of substantial monetary damages, costly royalty or licensing agreements or orders preventing us from offering certain functionalities, and may also result in a change in our business practices, which could result in a loss of revenue for us or otherwise harm our business. In addition, any time one of our products or services links to or hosts material in which others allegedly own copyrights, we face the risk of being sued for copyright infringement or related claims. Because these products and services comprise the majority of our products and services, our business could be harmed in the event of an adverse result in any of these claims. We have also had patent lawsuits filed against us alleging that certain of our products and services, including Android, Google Web Search, Google AdWords, Google AdSense, and Google Chrome, infringe patents held by others. In addition, the number of demands for license fees and the dollar amounts associated with each demand continue to increase. Adverse results in these lawsuits, or our decision to license patents based upon these demands, may result in substantial costs and, in the case of adverse litigation results, could prevent us from offering certain features, functionalities, products, or services, which could result in a loss of revenue for us or otherwise harm our business. We are also a party to other litigation and subject to claims incident to the ordinary course of business, including intellectual property claims (in addition to the trademark and copyright matters noted above), government investigations, labor and employment claims and threatened claims, breach of contract claims, tax, and other matters. Although the results of litigation and claims cannot be predicted with certainty, we believe that the final outcome of the matters discussed above will not have a material adverse effect on our business, consolidated financial position, results of operations, or cash flows. EPA Investigation In February 2009, we learned of a U.S. Environmental Protection Agency (EPA) investigation into an alleged release of refrigerant at one of our sma

Stockholders' Equity

Stockholders' Equity
	3 Months Ended Mar. 31, 2010
Stockholders' Equity	Note 12. Stockholders Equity The following table presents the weighted-average assumptions used to estimate the fair values of the stock options granted in the periods presented: ThreeMonthsEnded March31, 2009 2010 (unaudited) Risk-free interest rate 2.1 % 2.6 % Expected volatility 40 % 33 % Expected life (in years) 5.7 5.9 Dividend yield Weighted-average estimated fair value of options granted during the period $ 129.49 $ 198.10 The following table summarizes the activities for our options for the three months ended March31, 2010: Options Outstanding Number of Shares Weighted- Average ExercisePrice Weighted- Average Remaining Contractual Term (inyears) Aggregate Intrinsic Value (inmillions) (1) (unaudited) Balance at December31, 2009 12,776,488 $ 298.73 Options granted 24,563 $ 540.03 Exercised (147,057 ) $ 223.56 Canceled/forfeited (104,544 ) $ 336.04 Balance at March31, 2010 12,549,450 $ 300.25 6.3 $ 3,349 Vested and exercisable as of March31, 2010 6,076,814 $ 267.00 5.8 $ 1,824 Vested and exercisable as of March31, 2010 and expected to vest thereafter (2) 11,908,659 $ 298.57 6.3 $ 3,198 (1) The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the closing stock price of $567.12 of our ClassA common stock on March31, 2010. (2) Options expected to vest reflect an estimated forfeiture rate. The following table summarizes additional information regarding outstanding, exercisable and exercisable and vested stock options at March31, 2010: Options Outstanding Options Exercisable Options Vested and Exercisable RangeofExercise Prices Number of Shares Weighted- Average Remaining Life (Years) Weighted- Average Exercise Price Number of Shares Weighted- Average Exercise Price Number of Shares Weighted- Average Exercise Price (unaudited) $0.30$94.80 558,254 3.6 $ 22.44 539,401 $ 21.37 506,699 $ 22.37 $117.84$198.41 1,021,720 3.6 $ 177.24 1,021,146 $ 177.24 1,021,146 $ 177.24 $205.96$298.91 1,062,163 4.1 $ 275.11 1,047,983 $ 274.92 1,047,983 $ 274.92 $300.97$399.00 8,454,897 6.9 $ 309.78 3,204,336 $ 310.36 3,204,336 $ 310.36 $401.78$499.07 1,178,010 8.6 $ 437.42 118,032 $ 440.35 118,032 $ 440.35 $500.03$594.05 267,803 4.4 $ 537.02 176,323 $ 533.80 176,323 $ 533.80 $611.68$699.35 6,523 7.1 $ 628.03 2,250 $ 648.79 2,250 $ 648.79 $710.84 80 7.7 $ 710.84 45 $ 710.84 45 $ 710.84 $0.30$710.84 12,549,450 6.3 $ 300.25 6,109,516 $ 265.60 6,076,814 $ 267.00 The above tables include approximately 1.6million warrants held by selected financ

Income Taxes

Income Taxes
	3 Months Ended Mar. 31, 2010
Income Taxes	Note 13. Income Taxes We are subject to income taxes in the U.S. and numerous foreign jurisdictions. Significant judgment is required in evaluating our uncertain tax positions and determining our provision for income taxes. Our total unrecognized tax benefits as of December31, 2009 and March31, 2010 were $1,188 million and $1,271 million. Also, our total unrecognized tax benefits that, if recognized, would affect our effective tax rate were $814 million and $880 million as of December31, 2009 and March31, 2010. Our existing tax positions will continue to generate an increase in liabilities for unrecognized tax benefits. However, it is reasonably possible that our existing unrecognized tax benefits may be reduced by an amount up to $250million within the next 12months, none of which, will affect our income tax provision or the resulting effective tax rate. The amount could vary depending on the ultimate timing, nature of any settlements or expiration of statutes of limitations.

Information about Geographic Ar

Information about Geographic Areas
	3 Months Ended Mar. 31, 2010
Information about Geographic Areas	Note 14. 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 by geographic region for purposes of allocating resources and evaluating financial performance. There are no segment managers who are held accountable by our chief operating decision-makers, or anyone else, for operations, operating results, and planning for levels or components 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 addresses of the advertisers. The following table sets forth revenues and long-lived assets by geographic area (in millions): Three Months Ended March31, 2009 2010 (unaudited) Revenues: United States $ 2,627 $ 3,196 United Kingdom 733 842 Rest of the world 2,149 2,737 Total revenues $ 5,509 $ 6,775 As of December31, 2009 As of March31, 2010 (unaudited) Long-lived assets: United States $ 9,432 $ 9,855 International 1,898 1,884 Total long-lived assets $ 11,330 $ 11,739