Google 4th-Qtr Profit Misses Estimates, Shares Plunge
(Bloomberg counted on squalid estimates?? UFB!!)
Jan. 31 (Bloomberg) -- Google Inc., owner of the most-used Internet search engine, posted fourth-quarter profit that missed analyst estimates, sending the shares plunging 16 percent.
Net income rose to $372.2 million, or $1.22 a share, from $204.1 million, or 71 cents, a year earlier, Google said today in a statement. Revenue rose 86 percent to $1.92 billion. Profit, excluding one-time items, was $1.54 a share, short of the $1.78 prediction of Jefferies & Co.'s Youssef Squali.
The results disappointed investors, who had anticipated Google would beat estimates. Some investors had been expecting today's results to ease worries that the stock is overvalued after it more than doubled last year. Instead, Mountain View, California-based Google heightened concerns that began two weeks ago after Yahoo! Inc. reported.
''Each quarter the expectations have gone a little higher,'' Ken Smith, who manages $1 billion, including Google shares at Munder Capital Management in Birmingham, Michigan, said before the report. ''It's just that much more difficult to exceed.''
Squali, whom StarMine Corp. ranks among the most accurate Internet analysts, was 2 cents above the average $1.76 profit estimate of 31 analysts surveyed by Thomson Financial. Revenue, after sales passed on to other Web sites, doubled to $1.29 billion, matching analysts' estimates.
Google shares, up 31 percent in the fourth quarter alone, tumbled $67.64 to $365.02. They earlier rose $5.84 to $432.66 at 4 p.m. New York time in Nasdaq Stock Market composite trading. Yahoo fell $1.17 to $33.21 in extended trading.
Spending Doubled
''The company essentially met Street expectations as far as revenue was concerned,'' said David Garrity, director of research at Investec U.S. Inc. in New York. ''They did miss on the bottom line.''
Google doubled spending on sales and marketing to $154.8 million, more than the $128 million Squali had anticipated. General and administrative expenses rose as the company expanded and opened new offices. The company's tax rate rose to 41.8 percent for the quarter as it brought more income in from overseas. The rate was 31.6 percent for the year, compared with Google's forecast of 30 percent for 2005.
Google's report came two weeks after Sunnyvale, California- based Yahoo, the second most-used search engine, reported profit that missed analysts' estimates. Seattle-based Amazon.com Inc., the world's biggest online retailer, reports Feb. 2.
Yahoo's results showed growth in online searching had slowed.
Analysts Split
Analysts were split on whether that was good news or bad news for Google. Scott Devitt of Stifel Nicolaus in St. Louis downgraded Google shares to ''sell,'' saying they had risen too far. Robert Peck at Bear Stearns Cos. said Yahoo's report showed Google had been taking market share.
Devitt is among three analysts who rate Google a ''sell.'' Peck is among 30 analysts who have a ''buy'' recommendation. Five say ''hold.''
Google's new features enabled the company to attract Web surfers away from Yahoo and Redmond, Washington-based Microsoft Corp. Google also boosted sales by showing more ads next to some searches and the company is now expanding its online advertising software to new media including print and radio.
During the quarter, Google agreed to buy a 5 percent stake in AOL from Time Warner Inc. for $1 billion, introduced its Gmail e-mail system for cell phones and merged its local search engine and maps sites to enable advertisers to target users more precisely.
New Users
The constant roll out enabled Google to draw new users and keep existing surfers longer.
Google handled 60 percent of Internet search queries in November, up from 47 percent a year earlier, according to ComScore Networks Inc., which tracks Web use and whose data excludes Asia. Yahoo's share fell to 19 percent from 27 percent, while Microsoft dropped to 10 percent from 12 percent.
As well as taking a bigger share, Google is wringing more from each searcher on its site than Yahoo. Consumers are more likely to click on Google ads, Citigroup Inc. analyst Mark Mahaney said in a Jan. 6 note. Mahaney has a ''buy'' recommendation on the stock.
Google may have also benefited from putting a third advertisement above some search results, San Francisco-based Mahaney said. The company also introduced a free version of software designed to track the effectiveness of ads.
Clients buy ads that appear on Google, as well as other sites that use the company's advertising software. Sales on Google's sites were expected to rise 24 percent to $1.1 billion from the previous quarter, Squali said. Ads on other sites probably grew 13 percent to $764 million, he said in a Jan. 26 note.
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