Investment

Google Encounters Weak Results

October 20, 2012 by Roy Barnes in Investment with 0 Comments

The quarterly report of Google Inc. (GOOG -8.01%) was displayed on Wall Street around 3 hours prior to Thursday because of a glitch. The bigger worry, however, was the results reported by the number one search engine in the world. Shares of the company contracted after its 3^rd quarter results came lower than the expected growth, and they were released much before the closing of the market.

Amongst the other issues, the profits of the search giant plunged 20% compared to the same time a year ago to reach $2.18 billion or $6.53/ share. Revenue went up 45% reaching $14.1 billion, mainly due to incorporation of Motorola unit. But excluding Motorola, the revenue looked dipping for 4^th consecutive quarter, contracting to 19% growth rate compared to over 20% growth rates in last few quarters. To make matters worse, Motorola revealed a much bigger than predicted operational loss.

The discouraging results, along with the unexpected prior release from R.R. Donnelley (RRD -0.88%) & Sons Co. right away wiped the massive $22 billion off the company’s market capitalization throughout the day. The search engine firm’s shares were seen halting the trading for sometime before it resumed trading. At the time of market close at 4 p.m., the shares of the company improved slightly by 8% to reach $695, which was still a down of $60.49.

Still, the drop in stock was more of a reversal for the company, which experienced some kind of run-up in shares in last few months. The market capitalization of the company has recently managed to be even with the rival Microsoft Corp. (MSFT -0.32%) for the very first time, which was largely motivated by the great news about the online as business and wrong steps by rivals like Facebook Inc. (FB -4.55%). At the very root of the company’s profit slide was the most profitable ads on the popular video website, YouTube and its own Web search engine. The rate of growth of these ad sales have consistently contracted since mid 2011.

In the last quarter, there was a growth of 15% in ad sales but it still was a big down from 39% recorded a year ago.

About Roy Barnes

Roy Barnes has worked as a New York Times journalist who reports internationally in video and print. His social and economical state coverage has won awards from the Overseas Press Club, Concentra, SAJA and was nominated for The Livingston Award. He covered the Asian Tsunami, investigated Hugo Chavez's land wars, reported on Russia’s anti-American youth movements. Before joining The GDP Watch, Financial Group Media and The NY Times, Barnes worked as a freelance print reporter, his career began as a Pulliam Fellow at the Indianapolis Star.

View all posts by Roy Barnes →