In a recent CNBC video, host Josh Lipton spoke with senior vice president at Google's Cloud division, Diane Greene, about Alphabet Inc.'s (Nasdaq: GOOG, GOOGL) single-digit penetration in the cloud market. Lipton contrasted Amazon.com, Inc.'s (Nasdaq: AMZN) reported 40-percent cloud market share. The CNBC host asked the VP how Alphabet intended to close the gap and take "meaningful share" from competitors.
Ms. Greene responded that Google is "early" in the cloud-computing market, and expressed a view that overall, the industry has only achieved "5 percent" of its potential.
The VP stated that Google Cloud is "growing faster than any other cloud," and highlighted six enterprise clients, including SAP SE (NYSE: SAP) and HSBC Holdings plc (NYSE: HSBC), which the tech giant is currently working with.
Google Cloud backed by 'technology advantage'
The VP cited Alphabet's significant "technology advantage" with its "machine-learning services" providing momentum that appears to be "accelerating quite a bit." Speaking to Greene's talk of "momentum," Lipton noted reports that Google isn't "in the room" when it comes to big deals with many enterprise firms. He asked the VP if the reports were inaccurate.
Greene stated that when Alphabet is in contention to win a contract, the firm wins the work more than 50 percent of the time.
The Google Cloud VP said that she wasn't sure what the authors of the reports "were talking about." She stated that Google Cloud was "all about" providing its customers with "value," the "best price performance," the best function, and the best analytical capabilities.
Beyond Amazon's 40-percent, and Alphabet's 6-percent, market share, International Business Machines Corporation (NYSE: IBM), and Microsoft Corporation (Nasdaq: MSFT), are said to control 6 and 11 percent of the cloud market, respectively.
The rest of the cloud market, 37 percent, is served by smaller firms, grouped together by CNBC as "other."
Google uptime of 99.999 percent
Josh Lipton asked about Alphabet's seeming reputation for having a less-than-industry-leading sales force. The VP contrasted the choice faced by Alphabet between being a company with Google's technology capabilities, and being a firm with a more aggressive sales force.
Greene suggested that Google is working toward expanding is sales capacities, as well as investing heavily in customer service.
The CNBC host brought up a recent "outage" experienced by a competitor. He asked how the VP gives her corporate clients "confidence" that something similar won't occur with the Google Cloud. Diane Greene explained that Google has demonstrated "99.999 percent uptime" and that the system operated by Alphabet is "architect-ed not to go down." She cited a "no single point of failure" strategy as being key in the reliability of the Google Cloud, which was the "most reliable" in 2016.
Wall Street consensus earnings per share forecasts for GOOG and GOOGL stock have been cut significantly over the past 90 days: by 24.5 percent, from $40.91 to $33.32, in 2017, and by 18.6 percent, from $47.73 to $38.83, in 2018. If met, the numbers would represent EPS growth of -3.0 and 16.5 percent, respectively. Over the coming five years, GOOG and GOOGL EPS is expected to grow at an average annual rate of 19.4 percent.
