Google Accidentally Reports Weaker Than Anticipated Third Quarter Earnings

publication date: Oct 18, 2012
 | 
author/source: RJ Towner
Previous | Next
 

Tech giant Google (click ticker for report: GOOG) accidentally reported weaker than expected third quarter earnings today. Printing firm RR Donnelly (click ticker for report: RRD) mistakenly filed Google’s third quarter earnings just after noon eastern time, leading to some erratic trading in shares of the search giant. Regardless, the report revealed that revenue surged 45% year-over-year to $14.1 billion, boosted by the firm’s acquisition of Motorola Mobility (a bit lighter than anticipated). Earnings per share fell 7% year-over-year to $9.03, much worse than consensus expectations.

Paid clicks surged 33% year-over-year and 6% sequentially, driven by increasing mobile ad share, in our view. However, cost-per-click fell significantly, down 15% year-over-year, while traffic acquisition costs grew to 26% of revenue from 24% of revenue during the third quarter of 2011. Again, we suspect the migration to mobile may be causing more total clicks, but mobile ads are far less valuable than desktop ads. Though this could change eventually, especially when consumers become more comfortable with mobile shopping, the smaller and less effective ads command a considerable discount to traditional advertising.

Motorola revenues came in at $2.58 billion, but posted a non-GAAP loss of $151 million. We’re not exactly sure what Google has in mind for this hardware segment, but we suspect the company is laying the foundation to build its own hardware. In the interim, we expect the segment to lose money, but after considering Google’s cash flow generation capability, we don’t think it will be very material. The firm still posted $4 billion in operating cash flow during the third quarter and $3.13 billion in free cash flow. We plan to provide more color following the analyst call as new details come to light.


-------------------------------------------------
The High Yield Dividend Newsletter, Best Ideas Newsletter, Dividend Growth Newsletter, Valuentum Exclusive publication, ESG Newsletter, and any reports, data and content found on this website are for information purposes only and should not be considered a solicitation to buy or sell any security. Valuentum is not responsible for any errors or omissions or for results obtained from the use of its newsletters, reports, commentary, data or publications and accepts no liability for how readers may choose to utilize the content. Valuentum is not a money manager, is not a registered investment advisor, and does not offer brokerage or investment banking services. The sources of the data used on this website and reports are believed by Valuentum to be reliable, but the data’s accuracy, completeness or interpretation cannot be guaranteed. Valuentum, its employees, and independent contractors may have long, short or derivative positions in the securities mentioned on this website. The High Yield Dividend Newsletter portfolio, ESG Newsletter portfolio, Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio are not real money portfolios. Performance, including that in the Valuentum Exclusive publication and additional options commentary feature, is hypothetical and does not represent actual trading. Actual results may differ from simulated information, results, or performance being presented. For more information about Valuentum and the products and services it offers, please contact us at info@valuentum.com.

 
Previous | Next