Google Shares Plummet After Accidental Earnings Release

Google money

An estimated £13.7bn was wiped off the value of Google after the early release of its quarterly earnings report

Google had a difficult experience yesterday after it was revealed that third-quarter profit for the search engine giant totalled $2.18 billion (£1.3bn), down from $2.73 billion (£1.7bn) a year ago.

But that wasn’t the worst of it – Google also suffered an embarrassing early release of its third-quarter Form 8-K report to the Securities and Exchange Commission’s Web site, which meant the financial data was accidentally available four hours before the stock market was set to close.

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That accidental report release triggered an early selloff in Google shares, with share prices dropping by about 9 percent before the sale of shares were eventually halted, according to a report by Barron’s.

Google’s third-quarter revenue for the period ending 30 September, totalled $11.33 billion (£7bn), which is lower than the expectations of a survey of financial analysts, who expected revenue of $11.87 billion (£7.4bn).

In his opening remarks during the earnings call with analysts, Google CEO Larry Page said the early report at 12:30 pm Eastern time was accidentally caused by the company’s financial printer. “I’m sorry for the scramble early today,” said Page. “Our printers have said that they sent out the release just a bit early.”

Google’s revenue for the third-quarter is listed by the company at $14.1 billion (£8.8bn), which is before the deduction of traffic acquisition costs totalling $2.77 billion (£1.7bn). Q3 revenue for the same period one year ago totalled $9.72 billion (£6bn).

This was Google’s second quarterly earnings report since acquiring its Motorola Mobility unit in May for $12.5 billion (£7.8bn). In its second quarter earnings report this past July, Google posted revenue of $12.2 billion (£7.6bn), which was a 35 percent year-over-year increase from 2011.

“We had a strong quarter,” said Page. “Revenue was up 45 percent year-on-year, and we cleared our first $14 billion (£8.7bn) revenue quarter. Not bad for a teenager,” alluding to the 14 years since Google was incorporated.

Google’s operating income for the quarter stood at $2.74 billion (£1.7bn) on a GAAP basis, compared to $3.06 billion (£1.9bn) one year prior.

Motorola Contribution

The company’s revenue from its Motorola unit totalled $2.58 billion (£1.6bn), including $1.78 billion (£1.1bn) from the mobile segment and $797 million (£496m) from the home products segment. This was the first full quarter for the reporting of Motorola revenues, since the May acquisition came in the midst of the second quarter.

The operating loss for the Motorola unit on a GAAP basis was $527 million (£328m), including $505 million (£314m) for the mobile segment and $22 million (£13.7m) for the home products segment.

Google’s global workforce is down in this quarter to 53,546 full-time employees, including 36,118 at Google and 17,428 at Motorola. That compares to 54,604 full-time employees as of 30 June, 2012, according to Google.

Analyst Reaction

One financial analyst, Youssef Squali of Cantor Fitzgerald, wrote in an email that Google’s failure to meet analyst’s expectations for the quarter “is largely attributable to [foreign exchange currency issues] and Motorola in relatively equal measures, in our view. The bottom line was 15 percent below consensus due to a combination of lower revenue as well as higher operating  costs across almost all lines (costs, R&D and sales & marketing).”

At the same time, wrote Squali, “on the positive side, our preliminary analysis suggests that display ad revenues showed sequential acceleration well north of 50 percent, to roughly $1.7 billion (£1bn).”

Interestingly, Google’s mixed Q3 results were apparently not completely unforeseen by some financial analysts, according to an 17 October report by Reuters which questioned just how long Google’s share prices could keep growing and remain high.

Google’s shares “have clung tenaciously near record highs after a three-month, 30 percent rally fueled by rising optimism about Internet advertising, but Wall Street fears it may be running out of steam,” reported Reuters. Google stock peaked at $774.38 (£482.11) on 5 October.

It’s an interesting time for Google. The company faces serious market challenges from competitors such as Microsoft and Apple in the mobile marketplace, as well as regulatory battles in Europe and the United States regarding its user privacy policies and antitrust issues.

At the same time, its power and influence continue to grow, as does its reach into new products and markets around the globe.

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