Google's wide earnings miss, early earnings stun Street

Google Inc. inadvertently released its draft quarterly results hours ahead of schedule, significantly missing expectations on both revenue and earnings and wiping 9 percent off the market value of the Internet search and advertising leader.After being halted for more than two hours, trading in Google shares resumed at 2:20 p.m. CST with the stock down 10 percent. It rebounded to close at $695, down $60.49, or 8 percent.


Google said its financial printers, R.R. Donnelley, filed its draft results statement without authorization. The company said it was working now to finalize the statement.

Google’s $12.5 billion acquisition of Libertyville-based Motorola Mobility weighed heavily on the company’s bottom line. The search giant posted net profit of $2.18 billion for the third quarter, down 20 percent from $2.73 billion in the year-earlier period.

The third-quarter net income figure amounted to $9.03 per share, excluding certain items, far below the $10.65 per share expected by analysts. Net revenue, excluding traffic acquisition costs, totaled $11.3 billion for the quarter, falling short of Wall Street expectations of $11.9 billion.

Motorola Mobility generated an operating loss of $527 million for the quarter, with most of that amount coming from the mobile segment. Revenues for the unit totaled $2.58 billion. Google’s consolidated operating income for the third quarter was $2.74 billion, down from $3.06 billion in the same period of 2011.

BCG analyst Colin Gillis said the company's Motorola Mobility acquisition was part of the problem.

Motorola Mobility generated an operating loss of $527 million for the quarter, with most of that amount coming from the mobile segment. Revenues for the unit totaled $2.58 billion. Google’s consolidated operating income for the third quarter was $2.74 billion, down from $3.06 billion in the same period of 2011.

"The Motorola millstone had been ignored by the market, and -- boom- - now you've got weak revenue from Motorola," said Colin Gillis, an analyst at BCG. "When you acquire a business and you're about to whack all kinds of people and close offices, you know what happens to the employees? They take their eye off the ball. Sales are down."

According to the SEC filing, headcount at Motorola Mobility was 17,428 as of Sept. 30. In August, Motorola Mobility said it was laying off 20 percent of its 20,000-employee global workforce, affecting about 4,000 people. Locally, the company cut 700 of its 3,000 employees in Libertyville and Chicago.

Google reported net revenue -- excluding traffic acquisition costs -- of $11.3 billion for the third quarter, below Wall Street's expectations for about $11.9 billion.

The surprise announcement, which had been expected after the market close, pushed its shares down 9 percent to $687.30 before trading was halted by Nasdaq.

The company, which recently overtook Microsoft Corp. to become the second-largest U.S. technology company by capitalization, had been due to release its results after the market close.

The second paragraph of the press release merely read "Pending Larry quote," suggesting that space was reserved for comment from CEO Larry Page.