Google Is Getting Ready for the Future

 It might sound crazy to suggest that Google  (NASDAQ: GOOGL  ) , with a market cap approaching $400 billion, could do even better in the future, but the company is gearing up for significant growth. There are several ways Google can improve its earnings, and they don't include Glass, self-driving cars, or any of the popular new projects the company is working on.

The more things change, the more they stay the same
Among Google's main competitors, Microsoft (NASDAQ: MSFT  ) and Apple (NASDAQ: AAPL  ) have tried to start new ventures and change direction, but they are still the same companies they were a few years ago.

For years, Microsoft has been selling operating systems and the popular Office software. Apple has transformed into a devices company and has stayed that course since the introduction of the iPod. For all of the news surrounding Glass, self-driving cars, and Android, Google's primary business is still search and advertising. In fact, roughly 90% of the company's revenue is driven by Google Sites and Network.

Though the future of Google may lie in new ventures, the company can continue to capitalize on its existing search business and improve its Motorola and Google Play business to drive both earnings and share prices higher.

The Motorola opportunity
Since Google acquired Motorola, many have speculated as to why the company made this purchase. Some believe that Motorola was a treasure trove of patents and nothing more. Other analysts have speculated that Motorola was a key to competing directly with Apple.

The biggest difficulty Google faces in promoting Motorola devices is the fact that the Android system is supported by multiple manufacturers. While Samsung, LG, HTC and others spend billions developing newer and better devices that run Android, Google can't control the system or profit as greatly as if the company produced its own devices.

In the most recent quarter, Motorola produced roughly $1.2 billion in sales. However, this represented a 36% decline in revenue, and at the same time this division reported a gross margin of just 12%. While analysts are concerned about Apple's growth and margins, the company managed a sales decline of just 4% in the current quarter, and a gross margin around 38%. If Apple has a problem, Motorola is an abyss.

The company's non-Motorola operations generated a gross margin of nearly 61%. While this compares favorably to Microsoft's consumer gross margin of 60%, or the company's commercial gross margin of over 80%, Google's margins will continue to suffer as long as Motorola lags its competition. The good news is, Google has just begun to produce devices like the Moto X that can effectively compete with Samsung, LG, HTC, and others.

If Google's Motorola division can produce even flat revenue growth on a year-over-year basis, this would be a huge win for the company.

From play to serious business
One of the consistent knocks on Google's Android system is the fragmentation and different versions of Android being used on different devices. In addition, Android has been supported by multiple app stores.

The problem with multiple stores is, customers aren't sure which ones will be available in the future, or which ones will offer the most up-to-date apps. When Google began to focus on Google Play, it seemed as if this business turned a corner. Google Play has become the iTunes of the Android universe.

This is a key component of each of the competing mobile ecosystems. iTunes generated over $4 billion in revenue for Apple in the most recent quarter. Microsoft's Windows Store is a key factor in the company quickly becoming the default third ecosystem. By comparison, Google Play generated $1.2 billion in revenue in the most recent quarter, and this division grew revenue by 85% on a year-over-year basis.

Just to put the size of the Android ecosystem into perspective, the company reportedly activated over 900 million devices in just the first five months of 2013. By comparison, Apple sold around 50 million devices in the company's most recent quarter if we include iPhones, iPads, and iPods combined. If Apple can generate over $4 billion per quarter in iTunes sales, it seems reasonable that Google should be able to produce at least this much.

Billions in sales and just getting started?
Google continues to drive earnings growth, even with challenges in the Motorola business. As the company produces new Motorola devices with tight Android integration, and Google Play continues to evolve, Google's sales growth might improve further.

If the company can turn one of its newer ventures, like Glass or the promise of self-driving cars, into a broad based reality, this could be an opportunity worth over $300 billion hiding in plain sight.

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