Google Shares Slump After Poor Profits
It's certainly been an interesting week for Google. First they were bashed by the EU over their recent privacy changes. They've then been hit by proposals from the French government to charge them for listing French news content in their search results.
To cap it all though was the bungled financial results leaked to the world yesterday. While the official results, which can be read here, aren't all that impressive, undoubtably the biggest stir was caused by the manner of their release.
Google pinned the blame for the bungle on their securities filing agent, R.R. Donnelly, for releasing the earnings report prematurely. What can't be disputed, however, is the $22 billion it wiped off of their market capitalisation before Nasdaq suspended the shares and told Google to sort the mess out.
The bungled draft even contained a placeholder for a quote by Larry Page, which resulted in a spoof @PendingLarry Twitter account being created to parody the situation.
The rest of the release had slightly more serious implications, however. The company's net profit fell by 1/5 compared to the same period last year. Average revenue per click also fell by 15%, fuelling fears amongst investors that the advertising business at the core of Google is suffering along with the global economy.
When Mr Page’s actual quote finally materialized in the definitive earnings release, it stressed that Google had seen revenue rise 45% year-on-year in its latest quarter, to just over $14 billion. That is indeed impressive, but the costs of everything from those data centres to the restructuring of Motorola Mobility, its struggling mobile-device maker, have been rising fast.
Fixing Motorola swiftly and finding new ways to drive up advertising sales, which account for most of Google’s revenues, are a top priority for Mr Page and his team. But they face an increasingly complex regulatory landscape, which could hamper their efforts.
With anti-trust authorities on either side of the Atlantic monitoring how the company behaves, increasing revenues may be trickier than the company would like.
The company is said to be trying to negotiate separate settlements with both the European Commission’s antitrust officials and America’s Federal Trade Commission in order to avoid protracted legal wrangles.