Google's Numbers Fall Short

Google (GOOG) on Thursday reported fourth quarter net income of $1.21 billion, or $3.79 a share, on revenue of $4.83 billion, up 51 percent from a year ago. Excluding charges Google reported earnings of $4.43 a share. All of those figures missed Wall Street estimates.

According to Thomson Financial, Google was expected to report a fourth quarter profit of $4.44 a share on revenue of $3.45 billion. That revenue estimate excludes traffic acquisition costs. Excluding TAC Google had revenue of $3.39 billion, which was also shy of estimates.

Google shares were last trading at $512 in after hours trading.

There were a few product nuggets on the conference call:

• CFO George Reyes said social networking advertising is not monetizing as expected. When questioned further Sergey Brin, president of technology, said: “We don’t talk about individual partners or anything like that.” Brin noted some things were tried that didn’t pan out. While Brin won’t talk about partners it’s fairly obvious that MySpace is an issue. Google is obligated to pay at least $900 million in minimum revenue guarantees to MySpace through 2010. Later, the question was revisited again. He noted that Google also has Orkut and other social networking partners. “We have an incredible amount of this inventory,” said Brin. “I don’t think we have the killer best way to monetize social networks yet. We have had a lot of experiments (and some disappointments).”
• Google is tracking iPhone usage closely. The company said that usage of Google services on iPhone have doubled a month after the search giant launched optimized apps for the Apple’s phone.
• Google can’t answer any questions about the 700 Mhz wireless auction by the FCC. Google couldn’t talk about WiMax either.
• Brin said new infrastructure was launched for Gmail. “This new infrastructure has made development easier and improved performance,” said Brin.
• Brin added that YouTube has had strong growth and touted the political debate partnership with CNN.
• Google also signed a Google Apps deal with Genentech and Brin said the company is making headway with enterprise customers.

Among the notable figures (revenue figures include TAC):

• Google ended the fourth quarter with 16,805 employees, up from 15,916 at the end of the third quarter.
• Operating income for the fourth quarter was $1.44 billion.
• Google sites revenue was $3.12 billion in the fourth quarter, or 65 percent of total revenue. Google’s partner sites through AdSense generated revenue of $1.64 billion.
• International revenue was $2.32 billion, or 48 percent of revenue during the fourth quarter. In the same quarter a year ago Google international revenue was 44 percent of total revenue. The weak dollar padded Google’s international revenue.
• TAC is increasing. TAC was 30 percent of revenue in the fourth quarter, up from 29 percent in the third quarter.
• Expenses were held in check (for Google). Google said “other cost of revenues,” or data center expenses, credit card charges and content acquisition costs came in at $516 million, or 11 percent of revenue in the fourth quarter. That’s up from 10 percent of revenue in the third quarter. Operating expense in the fourth quarter remained at 30 percent of revenue, on par with the third quarter.
• Google had $14.2 billion in cash and equivalents at the end of 2007.
• For 2007, Google reported revenue of $16.6 billion and net income of $4.2 billion, or $13.29 a share. In 2006, Google reported revenue of $10.6 billion with net income of $3.07 billion, or $9.94 a share.

Comments

[Jerbear:]

Excellent summary of Googles last report. But you never said what you think the future holds for Goog. Buy or Sell?

2008 Jan 31 08:42 PM

[Victhom:]

Risk of a Global Recession Following the U.S. Hard Landing?
Nouriel Roubini | Jan 30, 2008
It is now clear that the US economy is already into a recession that started in December 2007: the data on December employment, retail sales, manufacturing ISM, housing and other macro variables confirm it. And the 0.6% growth for Q4 GDP confirmed that sharp slowdown of the economy in Q4 and its tipping over into a recession by December. It may take –as usual – almost a year for the NBER to formally declare that a recession started; but when that decision is made it will be clear that the great US recession of 2008 started in December 2007 or – at best – Q1 of 2008.

At this point it is clear that the debate has shifted to how deep this recession will be, a mild one lasting two quarters as the new consensus claims or a deeper, longer recession – lasting at least four quarters – as I have been arguing for a while.

It is also clear now that this US recession will lead to a global economic slowdown – short of a global recession that would occur if global growth were to be below 2.5% - and to actual recession in a number of individual economies.

2008 Feb 01 01:10 AM

[Victhom:]

The main points:

- the US has already entered a recession and this recession will be protracted and severe, more so than the mild recessions in 1990-91 and 2001;

- whatever the Fed does will be too little too late as you cannot resolve problems of insolvency with monetary policy and as it takes years to clear a glut of housing, consumer durables and automobiles;

- the rest of the world cannot decouple from a US hard landing; when the US sneezes the rest of the world catches the cold; and this time the US will have a severe case of pneumonia; thus expect significant contagion to the rest of the world; thus, there will be a significant global economic growth slowdown.

www.bloomberg.com/avp/...

en.wikipedia.org/wiki/...

2008 Feb 01 01:11 AM