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
10/19/2012 9:47:27 AM
Stupid analogy time.
You earn $50k a year. You've even managed to save a bit and have 200k in the bank.
Your pals, your girlfriend, etc, have a good time with you, you go out shooting, riding bikes, going to the bar, dancing, etc.
Then you find out that you got a 20% pay cut and now only earn $40k a year. You can no longer afford to go to the bar as much, go shooting, maybe sell a gun or some of your bike gear, and now you have to reach into your savings to make ends meet. Not the end of the world, for sure.
However your girl leaves you for another guy who is earning $55k, some of your buddies, who still earn $50k, now go shooting and riding without you, etc.
They now choose to [i]invest[/i] elsewhere because you are worth less now.
That's all investors do here; Google has suffered a 20% pay cut and is now worth less, and they now have to choose whether to stay or move their money elsewhere. This isn't speculation, this is basic math and good sense. Why would you put your eggs into a basket that won't give you any return?
"My sex life is pretty good" -- Steve Jobs' random musings during the 2010 D8 conference
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