On Wednesday, Oct. 10, Google (GOOG) is scheduled to report its third-quarter 2012 earnings and there will be plenty for investors to look out for and digest. For starters, it should be mentioned that back in August 2011, Google announced the acquisition of Motorola Mobility for $12.5 billion in a strategic move to strengthen the company's patent portfolio and protect the Android operating system from patent challenges. Hence, Q3 will be the first quarter in which investors could have an idea as to what Motorola Mobility is contributing to Google's top and bottom lines, or what it might contribute in the future.
Likewise, with the economy stuck in slow motion growth at best, it will also be interesting to see how online advertising and mobile advertising is holding up, along with any progress on the mobile advertising front. Finally, what inroads the Android mobile operating system is making compared with other options, especially in the wake of the Apple (AAPL) victory over Samsung Electronics on the patent front, will be interesting to hear about.
The Numbers Wall Street Expects From Google
According to the latest summary of analyst estimates from Yahoo Finance, the Wall Street consensus expects Google to report a 58.7% jump in revenues to $11.92 billion along with an EPS of $10.57 vs. $9.72 for the same period last year. The current EPS consensus estimate of $10.57 is also down from the $10.87 consensus number three months ago.
For the year, the Wall Street consensus for Google calls for a 45.5% revenue increase to $42.32 billion, while EPS is expected to rise from $36.04 to $42.53. For next year, the Wall Street consensus expects a 26.8% revenue increase to $53.66 billion, along with an EPS rise from $42.53 to $49.25. However, investors should keep in mind that these estimates for Google could move in either direction going forward.
In addition, investors should also keep in mind that Microsoft (MSFT) and Nokia (NOK) are both scheduled to report earnings on Oct. 18, Yahoo (YHOO) is scheduled to report earnings on Oct. 22, and Apple is scheduled to report earnings on Oct. 25. One way or the other, Google does compete with these companies.
What Google Reported Last Earnings Season
The last time Google reported earnings, it reported a second-quarter 35% jump in revenues to $12.21 billion and an 11% rise in net profit to $2.79 billion, or $8.42 a share. Revenue figures also included about six weeks of revenue from Motorola Mobility, while Google revenue itself was up 21% to $10.96 billion, and revenues after payments to website partners came in at $8.36 billion.
It's worth noting that during the last earnings conference call, Google executives did have a confident tone regarding their business, but there was virtually no insight into Motorola Mobility. Moreover, Google also appeared to be committed to finding a way to make mobile advertising pay off -- despite concerns about low mobile ad prices.
More specifically, Google executives also outlined three important bets for the company: 1) offer a more integrated advertising machine that spans search, display, and video; 2) improve ad quality; and 3) turn the enterprise business into a future engine for growth.
What You Need to Listen For
With the above estimates and results in mind, there will be a few important things to listen for when Google reports earnings besides the hard numbers. To start with, it was noted by a Google executive during the Q&A session of the last earnings conference call that it would be at least one or two quarters before the accounting "noise" is removed from the Motorola Mobility acquisition. Hence, the verdict on the Motorola Mobility acquisition will likely still be out for some time, but keep an ear open for any specific plans for the division -- besides more costly layoffs (up to $340 million worth so far), which will impact the bottom line.
It's worth remembering that virtually all of Google's revenue last year one way or another came from advertising -- meaning the company is bound to be impacted by the economic slowdown in much of the world. Google also needs to find a way to make advertising on mobile devices work, and it will be interesting to hear any commentary about progress on that front.
Another area where it will be interesting to hear questions asked would be regarding Samsung's loss on the patent front to Apple. After all, it has been reported that Steve Jobs apparently thought the Google Android mobile operating system was way too similar to that of the iPhone (the word used was "stolen"), and he had told his biographer that he would be willing to launch a thermonuclear war over it. While the Samsung court case loss does not necessarily open up a direct legal path to Google, the company will need to do something to keep its smartphone and tablet partners from panicking or from getting into the crosshairs of Apple's lawyers. That probably means Google will be need to put some distance between its products and those of Apple's to avoid any future problems.
Also, during the last earnings conference call Google was asked about any plans for share repurchases or dividends, since it had close to $28 billion in cash or cash equivalents lying around. The answer was no for either; therefore, don't expect any such announcements about repurchases or dividends this time around. But it would be interesting to hear something about what it intends to do with that cash hoard.
A Final Word About the Coming Google Earnings Report
While the third-quarter Google earnings report can hardly be considered make or break for the company, shares did rise about 5% immediately after earnings were reported the last time around and then eased back to a steady 3% gain to close up about 2%. That's not enough to make much of a difference for buy-and-hold investors, but certainly some short-term traders were probably able to make some profit off of the previous Google earnings report.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.