The world's most popular online search engine late on Thursday reported a 28 percent rise in second-quarter profit but the results fell far short of expectations on Wall Street where the firm's stock price sank.<\/p>\n
Shares in Google slumped on Friday more than five percent to close at 520.12 dollars.<\/p>\n
Google said net profit increased to 925 million dollars, or 2.93 dollars per share, in the April-June period, compared with 721 million, or 2.33 dollars per share, in the same quarter last year.<\/p>\n
Analysts were surprised by the high costs of hiring and bonuses, which had not been previously disclosed.<\/p>\n
"They are apparently hiring virtually every PhD who comes out with a computer science or math degree," said John Wilson, analyst at Morgan Keegan.<\/p>\n
Google reported revenues of 3.87 billion dollars, an increase of 58 percent compared with the second quarter of 2006 and six percent higher than the first quarter of 2007.<\/p>\n
UBS analyst Benjamin Schachter said that despite some positive revenue figures "the big story, however, is margin deterioration in the quarter due to significant and across-the-board higher operating expenses."<\/p>\n
Analysts pointed out that the below-consensus second-quarter earnings were due to higher spending on employees and the timing of certain bonuses.<\/p>\n
"We ended up higher on our head-count expenses than we planned and we will watch it," Google chief executive Eric Schmidt said during a conference call with analysts. "We hired a little faster than we had planned."<\/p>\n
Richard Jahnke at Briefing.com said he was not especially troubled by the results.<\/p>\n
He noted that Google shares are up 42 percent over the past 12 months, and 19 percent since the beginning of the year, "as it continues to expand its lead over rival Yahoo for Internet dominance."<\/p>\n
"Despite the slightly lower-than-expected results for the quarter, the company's core business remains solid, and we would be buying the stock on any weakness," Jahnke added.<\/p>\n
Jordan Rohan at RBC Capital Markets said the problem was that Google failed to disclose to Wall Street its "aggressive hiring and a change in accounting for employee bonuses," resulting in the negative reaction from investors.<\/p>\n
"It served as a reminder that Google remains an unconventional company with chronic investor communications miscues and unorthodox decision processes," Rohan said.<\/p>\n
Still, Rohan said he maintains a share price target of 560 dollars for the California-based giant.<\/p>\n
Analysts said one key figure, revenues excluding commissions paid to marketing partners, rose to 2.72 billion dollars, above the consensus estimate of 2.68 billion.<\/p>\n
Schmidt and Google co-founders Larry Page and Sergey Brin seemed unfazed as analysts pressed them about employee bonuses, litigation, and why "click" ad revenues were flat while visits to the search website were increasing.<\/p>\n
"We are going to do just fine making money," Brin said.<\/p>\n
Google said visits to its websites are on the rise worldwide and it expects to spend more on data centers and paying online partners.<\/p>\n
YouTube, which Google bought last year for 1.65 billion dollars' worth of stock, has expanded localized service to nine countries and a deal with Apple makes the website's videos available on popular new iPhones.<\/p>\n
But UBS's Schachter said the latest results provided a dose of reality to a company whose stock price seemed headed to the stratosphere.<\/p>\n
"The damage has been done to sentiment and expectations, and the stock could be range-bound for some time," Schachter said.<\/p>\n
"At the end of the day, the stock is not likely to recover anytime soon. While true long-term bulls will view this as a buying opportunity, we believe that most 'fast-money' will leave the story, at least through the end of the summer."<\/p>\n
<\/p>\n","protected":false},"excerpt":{"rendered":"
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