Google reports sharp drop in profits
NEW YORK, USA - Google on Thursday, October 18, reported a sharp drop in third-quarter profits, in disappointing results which sent the Internet giant's stock price tumbling after an erroneous early release.
Net profit was reported at US$2.18 billion, down 20% from $2.73 billion in the same period a year ago.
Google stock slid 8.0% to end at $695, taking the company's market value back down below that of Microsoft, which it overtook earlier this month as the number two player in the tech sector behind Apple.
The results were made public in a regulatory filing hours ahead of their scheduled release, which Google called a "draft" released by a printer "without authorization."
The final version came a few hours later, with the same numbers but with a comment from chief executive Larry Page in place of a line on the draft which said, "PENDING LARRY QUOTE."
"We had a strong quarter," Page said in the statement.
"Revenue was up 45 percent year-on-year, and, at just 14 years old, we cleared our first $14 billion revenue quarter. I am also really excited about the progress we're making creating a beautifully simple, intuitive Google experience across all devices."
In a conference call, Page later apologized for the mistake.
"I am sorry for the scramble earlier today. As our printers have said, they hit send on the release just a bit early," he said.
Google said revenue including sales from its newly acquired Motorola Mobility unit amounted to $14.1 billion. Google's own ad and other revenue rose 19 percent from a year ago to $11.53 billion.
Google's earnings per share adjusted for special items amounted to $9.03, far below Wall Street expectations of $10.65 per share.
Analysts were largely unfazed by the weak results.
"At first blush Google missed on the revenue and earnings per share lines, but a closer look suggests problems seem related to Motorola," said Brian Pitz and Brian Fitzgerald at Jefferies in a note to clients.
"Google core search seems healthy," they said, maintaining a price target of $850.
Independent tech analyst Jeff Kagan called the soft results "just a hiccup in Google's climb" and said the firm was still "on the growth side of the wave."
Anthony DiClemente at Barclays argued that "the sell-off presents a buying opportunity as we think the Street was overly optimistic going into the quarter and did not fully discount the potential Motorola drag on the business."
Google in May completed a $12.9 billion deal for Motorola Mobility, a key manufacturer of smartphones and other devices that put the Internet giant in head-to-head competition with Apple.
Google acquired 17,000 patents with the purchase of Motorola Mobility and has been strengthening its patent portfolio in the fight for dominance in the booming smartphone and tablet market.
Motorola Mobility was created in 2011 when US-based Motorola Inc. split the company into two separate entities: a mobile devices unit, and a government and public safety division known as Motorola Solutions.
Google remains dominant in its core area of online advertising with a 74.5% share of the US search ad market, according to data from eMarketer.
Google's ad revenue alone is expected to account for 41.3% of total US digital ad revenues in 2012, eMarketer projects. - Agence France-Presse