Google Net Hit by Charge, but Ad Sales Are Strong
Google Inc. posted a 68% drop in fourth-quarter profit, dragged down in part by its investment in AOL, but sales were strong despite the worsening economy.
Results suggested that Google's search-advertising business and cost-cutting campaign are helping it weather the recession better than other Internet companies.
The Mountain View, Calif., company posted net income of $382 million, or $1.21 a share, down from $1.21 billion, or $3.79 a share, a year earlier. Revenue rose at an 18% annual rate, down from 31% in the third quarter, to $5.7 billion, from $4.83 billion. Profit ...
Investors see economy slowing Google's growth
By Yinka Adegoke
NEW YORK (Reuters) - Wall Street is reining in its usual optimism for Google Inc (GOOG.O) as analysts worry the Web search leader's fourth-quarter earnings could be hit by keyword pricing deflation as the U.S. recession takes hold.
Google, which reports earnings after markets close on Thursday, will likely meet or slightly beat most financial forecasts, said investors and analysts.
But Google's story as a rapid growth company, which would benefit as traditional media advertising falters in an economic slowdown, has changed in recent weeks. Investors now believe Google's fortunes will follow the troubled economy more closely than previously thought.
"Clearly there was an impact in the quarter from economic issues," said Darren Chervitz, a portfolio manager at Jacob Internet Fund, a long-term holder of Google stock.
"We've seen it sporadically despite their claims that search will be resistant to a recession. I'd be shocked if they had a good quarter," Chervitz added.
Google makes most of its revenue from paid search advertising, when users click on advertiser links that come up with their queries. The cost per click, or price an advertiser pays for keywords, is determined by an automated auction.
Advertisers are more inclined to bid higher when there's a better rate of click-throughs to view their advertised services. Some Google investors think in a slow economy fewer consumers are clicking through to buy -- hence bids will be much lower, harming the search company's top-line revenue.
While Google doesn't provide quarterly outlooks, there are market signs of deflationary pressure.
IAC/InterActiveCorp (IACI.O) Chief Executive Barry Diller told investors earlier this month that his company's search engine Ask.com, which uses Google's advertising platform, said that over the past few weeks cost-per-click pricing appeared to have fallen around 5 percent to 10 percent from a year ago.
Bernstein Research said its channel checks indicated a "sharp dip" in keyword pricing from late October.
Sandeep Aggrawal, an analyst at Collins Stewart, said he and others will be paying close attention to Google's net revenue growth between quarters. "Wall Street is expecting 2 percent, and anything below that will not be good," said Aggrawal.
WALL STREET EXPECTS
On average, analysts are expecting Google to report a 2 percent rise in fourth quarter gross revenue to $5.65 billion from the third quarter, with net profit at $4.16 a share, according to a Reuters Estimates poll.
Many investors are still confident that Google's sheer scale leaves plenty of room to grow and diversify.
"The results are unlikely to change our core long-term view on Google and any sell-off, post earnings, would just be another attractive opportunity for us," said George Kurian, investment analyst at Tradition Capital Management.With its nearest but distant competitor Yahoo Inc (YHOO.O) still in disarray after appointing a new chief executive last week, and Microsoft Corp (MSFT.O) still undecided about its next move in search, Google is seen as being in a strong position for some time both on the Web and new platforms.
Kurian said Google is well positioned for leadership in many high-growth markets such as International search, mobile ads, video search and others.
Google has acknowledged economic challenges. Chief Executive Eric Schmidt has said the economic environment is "uncharted territory."
The company has focused on cost cuts and slowing capital investments. It started axing thousands of contractor roles late last year and last week it said it would be cutting 100 recruiter full-time jobs, significant for a company that has been hiring at rapid pace in recent quarters.
The company is also shutting smaller engineering outposts and wrapping up unprofitable online trial projects.
Google on Tuesday killed a program to sell newspaper ads because it wasn't making enough money.
Investors said they welcome operating cost discipline but worry what it says about Google's view of its future growth.
"I don't think this is a case of an overhaul they have to do with cost cuts. It's more about setting your targets according to your revenue," said Martin Pyykkonen, an analyst at Wunderlich Securities.
(Reporting by Yinka Adegoke; editing by Richard Chang)
(Click here to see Reuters MediaFile blog)
沒有留言:
張貼留言