Google Shares Drop After Disappointing 2Q Earnings
Date : 18 Jul 2008 Category : Technology
NewsFactor NetworkManagement said economic turmoil in the United States and parts of Europe appears to be causing consumers to click less frequently on the ads that generate virtually all its profits.
That unnerved already jittery investors, although Google managers said they expect the Mountain View-based company will thrive even if the economy weakens further.
Its shares fell $45.20, or 8.4 percent, to $4488.24 in early trading Friday, leaving it below $500 for the first time in three months.
The red flags raised after the bell Thursday included a dramatic slowdown in the company's hiring pace and Google Chairman Eric Schmidt's description of the economy as "challenging." Google's chief economist, Hal Varian, even participated in the company's conference call for the first time to discuss business conditions.
"That was a tip-off," said Cantor Fitzgerald analyst Derek Brown. "Economic sluggishness has entered the discussion at Google, more so than we have ever heard."
Google earned $1.25 billion, or $3.92 per share, during the three months ended in June. That represented a 35 percent increase from net income of $925 million, or $2.93 per share, at the same time last year.
If not for costs incurred for employee stock compensation, Google said it would have earned $4.63 per share. That figure missed the average earnings estimate of $4.74 per share among analysts surveyed by Thomson Financial.
Google's second-quarter revenue fared slightly better than earnings, rising 39 percent to $5.37 billion from $3.87 billion at the same time last year.
More than half the revenue -- $2.8 billion -- came from international markets, helping to offset some of the economic weakness in the United States.
After subtracting commissions paid to its ad partners, Google's revenue totaled $3.9 billion -- about $30 million above...