PROVEN RESULTS

Google's new parent company Alphabet is off to an amazing start.

Alphabet posted a shockingly good profit and better-than-expected sales in the third quarter, sending the stock up 10% to an all-time high.

The company's sales rose 13% and profit grew a whopping 45% in the past quarter. Particularly encouraging for Alphabet is the fact that much of the growth is coming from mobile search. This was once a big question mark for Google as advertisers refused to pay the same rates for unproven mobile search ads as they did for tried-and-true desktop advertisements.

Google also called out YouTube for having an impressive past quarter.

"Our ... results show the strength of Google's business, particularly in mobile search," said Ruth Porat, Alphabet's chief financial officer, in a prepared statement. "With six products now having more than 1 billion users globally, we're excited about the opportunities ahead of Google, and across Alphabet."

Also helping Alphabet's stock: The Company announced it was buying back $5 billion worth of its own stock. Investors love when companies do that, because it raises the value of their own holdings.

Porat, a former Wall Street rock star, was brought in earlier this year to make the company more efficient and transparent. She helped lead the company's restructuring to become Alphabet, in which Google spun out its exotic projects like driverless cars and anti-aging research into separate companies. Alphabet (GOOGL, Tech30) is now the parent company of all of those smaller companies, one of which is Google.

Google officially took on its Alphabet structure on Oct. 2, the first day of Google's current fiscal quarter. That means we won't get a first glimpse at how well each of the various Alphabet entities is performing until Alphabet reports its fourth-quarter financial results in January.

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YouTube will begin selling $9.99-a-month subscriptions that will allow U.S. customers to watch almost everything without ads, to download videos for viewing offline and to keep content playing on a smartphone or tablet even when using a different app.

But those widely requested features aren't all that subscribers will get. The service, called YouTube Red, offers access to highly produced original shows and movies that can't be found anywhere else. Google Play streaming music will be included too.

YouTube Red is intended to turn the enormously popular Google-owned company into a profit maker, not a money loser.

Ad revenue isn't enough to meet the enormous expenses of serving billions of videos every day — even when most videos are supplied by users for free. YouTube could generate nearly $950 million annually in new revenue if just 5% of U.S. users signed up for the subscription, UBS analysts estimate.

Red marks the beginning of "a long journey," according to YouTube.

Matthew Glotzbach, the company's vice president of product management, said, "By no means would we expect to jump to tens or hundreds of millions of paying users overnight," but there should be "strong demand" from the start.

Financial analysts who follow Alphabet Inc., Google's parent company, say YouTube could become a major profit engine. But rivals, including Facebook, Snapchat and Vimeo, are threatening its potential by stealing away both video makers and viewing time.

Growth of YouTube's net ad revenue in the U.S. is expected to slow rapidly over the next three years, the market research company EMarketer said in August. According to EMarketer's calculations, worldwide net revenue will be $4.3 billion in 2015, up 41% from last year.

Yet to be determined is how the subscription model will affect an expanding generation of YouTube stars, many of whom began by filming videos in their bedrooms and elsewhere, cracking jokes, dancing and talking to the camera about everything from fashion to video games. They uploaded the videos to YouTube, attracting advertising sponsors, and, in a few cases, becoming millionaires in the process.

YouTube often places several ads on the same page as a video, and attracting millions of viewers has meant steady, growing income for video makers, who get 55% of ad revenue.

It's unclear how the commercial-free subscription will affect ad income, though YouTube Chief Business Officer Robert Kyncl said the "vast majority" of YouTube's subscription revenue will go to the YouTube Red content creators. Certainly, some creators will lose out on money from heavy viewers who might encounter lots of ads or be willing to pay more than $10 a month for a subscription.

With Red, YouTube also plans to create a new, subscriber-only slate of original shows and movies for its most popular video stars. The selected creators will be gambling that slicker content will broaden their viewership and fatten their paychecks.

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Ferrari opened at $60 per share at its trading debut on Wednesday, 15% above its IPO price of $52.  

The luxury sports car maker had priced its IPO at the higher end of expectations for between $48 to $52. It was indicated to open between $59 to $62 per share.

The stock is trading with the ticker RACE.

The company raised $893 million at its initial public offering, according to Bloomberg.

Ferrari is listed New York Stock Exchange, which currently has several sports cars parked outside its premises. Chairman Sergio Marchionne rang the NYSE's opening bell on Wednesday.

The company was spun off from Fiat Chrysler Automobiles, which is expected to offer the public over 17 million shares, or about 10%. It will raise at least $4 billion from the Ferrari public offering.

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Ferrari NV (RACE.N) priced its initial public offering at the top of expectations on Tuesday, raising $893 million, as drivers enamored with the luxury sports car maker snapped up its shares alongside institutional investors, defying a choppy market.

Ferrari, controlled by Fiat Chrysler Automobiles NV (FCA) (FCHA.MI), pulled out all the stops to market itself to some of its cars' owners as well as Wall Street, and also limited the offering to a 9.1 percent stake in the company.

The strategy paid off, as the IPO was priced in New York on Tuesday at $52 per share, the top end of its indicated $48 to $52 per share range, according to people familiar with the matter. The IPO gives Ferrari a market capitalization of around $9.8 billion.

The sources asked not to be identified because the pricing details of the IPO were not yet public. Ferrari did not immediately respond to a request for comment.

The proceeds will be used to help fund FCA's ambitious growth plan centered around the revamp of its Alfa Romeo, Jeep and Maserati brands. A successful listing will bolster FCA's finances at a time when its calls for a merger partner have fallen on deaf ears.

The company's listing comes a week after several big IPOs were discounted or delayed. Payment processor First Data Corp (FDC.N) priced this year's biggest public offering below its indicated range, while supermarket operator Albertsons Companies Inc (ABS.N) had to postpone its IPO the night before its shares were expected to start trading. Luxury fashion retailer Neiman Marcus Group Inc has also delayed its IPO to 2016.

Unlike Neiman Marcus, First Data and Albertsons, however, Ferrari is not a big leveraged buyout looking to pay down debt. Fiat Chrysler is taking Ferrari public to sell a tenth of its 90 percent stake in the company. All proceeds from the IPO will go to FCA, according to a regulatory filing.

The luxury car company also approached a different investor mix, attempting to capitalize on the emotional resonance of its brand. It targeted more retail investors than a typical IPO, honing in on high net-worth individuals and Ferrari owners, some of whom said they got letters this summer inviting them to buy company shares once it listed.

"A classic Ferrari is a better investment than the stock, but I still plan on buying shares," David Radeloff, who has owned a number of the cars, said in New York ahead of the offering.

The strategy demonstrates an understanding of what drives many investment decisions, said Meir Statman, professor of finance at Santa Clara University and author of "What Investors Really Want."

"The utilitarian benefits of a Ferrari are no different from those of a Toyota," he said. "Both will take you from home to work and back. But Ferraris yield expressive and emotional benefits that Toyotas cannot match."

"A 70-year old in a Toyota is old, but a 70-year old in a Ferrari is young," he added.

The overall windfall for FCA, including proceeds from the IPO and 2.8 billion euros ($3.2 billion) to be transferred to the parent as part of Ferrari's spin-off, is seen at around $4.2 billion.

Shares in Maranello, Italy-based Ferrari are expected to start trading on Wednesday and list on the New York Stock Exchange under the symbol "RACE."

UBS AG (UBSG.VX) and Bank of America Corp (BAC.N) are lead underwriters of Ferrari's IPO.

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