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Google falls after 4Q misses view
Shares of Google Inc. fell Friday after the company said its fourth-quarter earnings and revenue growth slowed more than analysts had expected, unnerving investors already nervous about the possibility of a U.S. recession.

The online search engine operator's shares shed $48.40, or 9.6 percent, to close at $515.90.

The stock has moved between $437 and $747.24 in the past year, hitting the upper end of this range in November and sliding downward in January. In the past month, Google shares have declined more than 25 percent.

Google said late Thursday that it earned $4.43 per share, excluding stock awards given to employees, on revenue, excluding commissions paid to the company's advertising partners, of $3.39 billion.

This compares to expectations of analysts polled by Thomson Financial for a profit of $4.44 per share on revenue of $3.45 billion, with both figures accounting for the same exclusions.

Jefferies & Company Inc. analyst Youssef H. Squali reacted to the report by downgrading the stock to "Hold" from "Buy" and lowering his price target to $600 from $725.

Squali said rising traffic acquisition cost rates and operating expenses pressured the company's margins, overshadowing revenue in line with estimates and resulting in the earnings miss.

The traffic acquisition cost rates are related to guaranteed payments the company owes through advertising deals to sites such as News Corp.-owned social-networking Web site MySpace.

"Given the rising guaranteed payments to MySpace, Ask.com and others and the absence of operating leverage, we believe that the risk profile of Google has increased and recommend that investors step to the sidelines," he wrote.

Meanwhile, Citi Investment Research analyst Mark S. Mahaney cut his Google price target to $650 from $775, while RBC Capital Markets analyst Jordan Rohan lowered his target to $675 from $725.

"Given the lack of positive catalysts, we believe that shares could remain range-bound near term, but we would be adding to positions at current levels," Rohan wrote in a note to investors.

Some, including J.P. Morgan analyst Imran Khan, took the company's report more in stride.

Khan said that while the company reported a bit of a revenue miss, his pro forma earnings estimate for 2008 remains pretty much unchanged. He lowered his expectations slightly, and now anticipates pro forma earnings of $20.32 per share for the year, down from a prior estimate for $20.92 per share.

"Google generated over 50 percent of its traffic internationally and we think monetization improvement in the international market will be a key catalyst for continued strong paid clicks growth," he wrote.

Khan also said the company's hiring control is a positive, as the company's headcount grew just 6 percent over the third quarter. He expects Google's management to continue controlling hiring in the future.
http://www.businessweek.com/ap/financialnews/D8UHR4LG0.htm