News Column

Google Earnings Off, Stock Drops

Jan. 18, 2013

Jeremy C. Owens, San Jose Mercury News

Google headquarters in Mountain View, Calif. (Ashtar01, Creative Commons)
Google headquarters in Mountain View, Calif. (Ashtar01, Creative Commons)

Attempting to avoid a second consecutive earnings report embarrassment, search giant Google (GOOG) told Wall Street in a Friday blog post that analysts were expecting too much revenue in the final three months of 2012 because of the company's sale of its Motorola Home unit.

Google's treasurer and chief accountant, Brent Callinicos, wrote in a blog post that "people who follow our company may not be fully aware of how (the Motorola Home sale) impacts our financial reporting."

Callinicos notes that the company must count any Motorola Home revenues as "discontinued operations" in its upcoming earnings announcement, after it agreed to sell the set-top box business to Arris Group for $2.35 billion in December. Revenues from that unit will therefore not be counted in Google's numbers for the quarter.

"As of this writing, a majority of Wall Street analysts who cover Google have not reflected the Home business as discontinued operations in their estimates," Callinicos wrote.

In its most recent earnings report, for the July-September quarter, Google reported that the Motorola Home business produced profits of $25 million on revenues of $797 million; overall, Google reported net income of $2.18 billion, or $6.53 a share, on revenues of $11.33 billion, after subtracting commissions paid to partners. Analysts on average currently expect Google to report profits of $ 8.54 a share on revenues of $12.33 billion, according to Thomson Reuters research.

The most recent earnings release for Google was considered disappointing, as analysts expected profits of $8.71 a share on revenue of $11.87 billion. The report caused more embarrassment for Google, however, because contractor RR Donnelley mistakenly issued the report several hours before it was scheduled for release, in the middle of the day's trading session instead of after the bell. Shares fell more than 9 percent, wiping out more than $20 billion of the Mountain View company's market value.

BGC Partners analyst Colin Gillis said at the time that the early release of the report created "a knee-jerk reaction. Phones were exploding and people were trying to digest the numbers with no commentary from the company."

Google shares dipped Friday morning after the blog post arrived, with the stock ending the morning session on Wall Street at $702.96, a decline of $8.36, or 1.2 percent, from Thursday's closing price. Google is scheduled to release its earnings report for the final three months of 2012 on Tuesday.

Staff writer Brandon Bailey contributed to this report.

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Source: (c)2013 San Jose Mercury News (San Jose, Calif.) Distributed by MCT Information Services

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