You will have read or heard by now that Google prematurely published their third quarter earnings report thanks to a cock up by their financial printer R. R. Donnelly & Sons Co and that the mistake cost the company $20 billion in value as the share price plummeted. Or maybe you haven’t, so let me fill you in briefly.
Google was due to announce the earnings report after the closing bell on Thursday trading but somehow managed to send it out early. A huge gaffe made worse by the fact that the numbers were disappointing, missing analysts predictions by a margin. The resulting scramble on the stock exchange saw the share price fall from circa $744 to as low as $685 – roughly 9% – before Google called a halt to trading on the Nasdaq to allow investors time to digest the news.
All of this has rather overshadowed the actual report. Here are those numbers, along with what analysts were expecting.
Revenue
Overall revenue was up some 45% on last year to $14.1 billion, with $11.3 billion from Google’s ad business – analysts were expecting $11.5 billion. Doesn’t sound like much of a difference, does it? However, it highlights that prices for ad clicks are falling, whether Google want to admit it or not.
Google made $2.18 billion in the third quarter, down from $2.73 billion in the same period last year. Why? The acquisition of Motorola Mobility – which is losing money all the time – and various accounting costs are blamed for this. It’s still a healthy profit but in light of the fact that Google had been performing well in the previous three quarters, it comes as a hit and contributed significantly to the rushed sell-off of Google shares.
That $2.18 billion amounts to $6.53 per share compared to $8.33 per share in the previous year – that makes the drop a lot clearer. As does the fact that analysts were expecting $10.63 per share. That’s a huge difference and, coupled with the early announcement (or complete fuck up, depending on how harsh you want to be) it’s not hard to see why the market panicked and Google lost $20 billion.
The share price right now stands at $695, an 8% drop from the opening price and in after hours trading had recovered to just about $700.
Conclusion
All in all this was a major embarrassment for Google, which had overtaken Microsoft to become the world’s second most valuable technology company behind Apple in recent months. However, the mistake aside, the earnings report itself, while missing analysts predictions wasn’t that bad. Yes, profits were down but when you take into account the Motorola Mobility deal it’s not hard to see why. Looking forward Google do need to address the losses that section of the company is suffering but overall the business is very healthy.
That will be no comfort to owners of GOOG today though.
