Inadvertently Leaked Earnings Report Leads to Shaky Trading Day for Google
October 18, 2012 7:08 PM
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Strong sales revenue helps offset ballooning costs from Motorola, advertising
Today was a wild day for Google. Things started off on the wrong foot, as its earnings report was
ahead of schedule. This little nugget of information provided within the earnings report sent
Google's stock plunging during the trading day
Average cost-per-click, which includes clicks related to ads served on Google sites and the sites of our Network members, decreased approximately 15% over the third quarter of 2011 and decreased approximately 3% over the second quarter of 2012.
This shows that Google is starting to lose money on its key moneymaker -- clickthroughs using AdWords. When investors caught word of this, the stock took a serious beating. At around the time the results were published early (around noon EST), the stock plummeted roughly $70, but slightly recovered throughout the trading day. By the closing bell, Google was down $60.49 or 8.01 percent.
paints a picture of rising costs and rising income -- which together have led to a slight slide in profitability.
Google is still working to stabilize
its troubled acquisition
, Android handset maker Motorola Mobility. The company poured $349M USD into restructuring the troubled asset, shuttering certain struggling regional units and
committing to layoffs
Motorola did pull in a decent chunk of cash, earning $2.58B USD for the quarter -- or roughly one-fifth of the $14.10B USD in total consolidated revenues for Google in its fiscal third quarter. But the bad news is that Motorola's revenue is
back on a downward slide
after a brief recovery to $3.3B USD
in Q3 2011
Traffic acquisition costs (TAC) -- the amount of revenue Google shares with advertising partners -- totaled $2.77B USD (26 percent of Google's revenue), up noticeably from the $2.21B USD (24 percent of total revenue) that Google shared in Q3 2011.
Across the board, other costs were on the rise as well -- advertising, administrative, sales/marketing, and research and development (R&D). R&D, for example rose from $1.4B USD last year to $2.0B USD this year. Google now employs 53,546 full-time employees (36,118 at Google and 17,428 at Motorola); that's up substantially from the just-slightly-over 33,000 Google employed
in Q1 2012
Google's cash pile has shrunk as spending has risen. [Image Source: OMG Droid]
Among the 38 analyst surveyed the expectation was a profit of $2.99B USD by Google. That means that the actual result -- $2.176B USD -- was a big miss. The analysts expected $11.867B USD in revenue after TAC, versus the delivered result of $11.33B USD -- another miss.
But Google isn't exactly crying over that profit and reveue misses. Its war chest is down slightly from the $49.3B USD in cash it had at the end of Q1 2012. Google's current cash/cash equivalents pile is at $45.7B USD.
Google's heavy research and development spending has fueled Android to a population of
500 million handsets in the wild
, with activations recently reaching 1.3 million smartphones per day. Even as it rides the wave of an industry transition towards greater mobile usage, Google is greedily eyeing even more ambitious efforts, like wearable electronics (
) and automation of mundane tasks (like
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RE: Frickin Speculators
Dr of crap
Dr of crap
10/19/2012 8:23:36 AM
I agree. It's the herd mentality when dealing with the stock market.
Stupid but true examples -
Have a bad cup of coffee, better go sell all my food stocks. Get a cold better go dump all the cleaning supply companies. DID the leader of that oil exporting country NOT shake the presidents hand long enough! I'd better buy more stock in any company that makes weapons and drive up the price of oil futures. So there was a freeze in Florida, buy more car companies stock?
I don't think that way and after all my years still don't understand it. How you make some of those wild conections and if everyone is selling then you have to sell as well. I went through the big dip of '87 and the crash of '08, and you don't have to sell every stock just because everyone else is. I know those that sold in '87 and lost cash. I stayed in and didn't loose any. It will bounce back. I've seen it happen.
These guys that react fast to news like this are the ones that make the market do wild swings. While the rest of us have to suffer from their stupid reactions. Looking ahead only for a day or two is the problem. No long term forward thinking. Only what can I make today.
"Spreading the rumors, it's very easy because the people who write about Apple want that story, and you can claim its credible because you spoke to someone at Apple." -- Investment guru Jim Cramer
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