Google earnings miss expectations, shares drop 8%
- Surprises Wall Street
- R.R. Donnelly accidentally made preliminary results available
- Mistake was likely inadvertent, no comment yet on that issue
Google shares closed down 8% to $685 Thursday after a roller-coaster day in which a preliminary version of its third-quarter earnings was prematurely released.
At 4 p.m., just as the market closed, the search giant confirmed reported net income of $2.2 billion compared with $2.7 billion in the same period a year ago.
CEO Larry Page said on a conference call after the market close that Google is amid a mobile transition.
"All of this abundance causes disruption," he said.
Excluding costs, the company's profit slid to $9.03 per share from $9.73 a share a year prior. Wall Street analysts were forecasting earnings per share of $10.65.
Revenue, less traffic acquisition costs, came in at $11.3 billion, below the $11.9 billion expected by a survey of analysts from Thomson Reuters. A key metric that was down: Google's cost per click declined 15% from a year ago.
"As they ad more and more Android devices and that mobile monetization is lower than desktop monetization, you're going to see this trend," says HfS Research analyst Jonathan Yarmis.
Another blow to Google earnings, its Motorola Mobility unit reported an operating loss of $151 million in the third quarter. Google bought the distressed handset manufacturer last year for $12.5 billion.
As the early release snafu was sorted out midday Thursday, Google said R.R. Donnelly, a New York financial printing firm, inadvertently made an incomplete version of the quarterly results available just after 12:30 p.m.
Trading in Google shares, down 9% ahead of the early release, was halted 20 minutes later. By 3:20 p.m., trading had resumed.
"As long as I've been doing this, I have never seen a company reporting in the middle of the day." says Christine Short, senior analyst at S&P Capital IQ research firm.
Prior to the unexpected release of the numbers, expectations had been lifting for Google, a key player in the faster growing Internet advertising business and the company behind the popular Android operating system for smartphones.
Analysts had expected Google to earn $8.69 a share using accepted accounting principles, up 4% from what it reported in the same quarter a year ago. But these results add to what's been a year of strong growth for the company, with Google expected to boost its earnings this year by more than 20%.
Investors had been turning bullish on Google, briefly pushing its market value ahead of Microsoft's last week, as they see the company's ability to integrate its recent purchase of Motorola Mobility, a smartphone maker.
Meanwhile, the risk of social media and Facebook stealing lucrative online ads has proven minimal at this point.
After the market close, investors also heard how Microsoft is faring on technology spending and personal computers heading into the critical fourth quarter.
The timing was especially critical for Microsoft (MSFT), as the languishing tech giant prepared to unleash one of its more aggressive slates of new products in years. They include a new version of Windows, called Windows 8, and the latest iteration of its smartphone operating system called Windows Phone.
"With the Windows 8 launch, there are many unknowns," says Andrew Lange, analyst at Morningstar.
Expectations for Microsoft have been muted as many of the other major players in the PC business, including Intel and Hewlett-Packard, have warned of sluggish demand. Analysts are calling for Microsoft to earn 63 cents a share, down from the 68 cents it earned in the quarter a year ago, says S&P Capital IQ.
Intel, the largest maker of chips for PCs that has been slow to get into the smartphone market, gave investors the latest bad news. The company said Tuesday that net income fell 14% and the immediate future is looking challenging.
Contributing: USA TODAY staffers Adam Shell and Matt Krantz