Google's disappointing quarter: early reaction

Google shares are down more than 7% in heavy after-hours trading as investors reacted to the company's second-quarter results. Profit was $4.63 a share, but analysts had been looking for $4.74. Revenue squeaked past expectations, at $3.9 billion compared to the $3.87 billion the Street had targeted.

Looks like Google may not have escaped the economic problems affecting other online advertising companies. In a prepared statement, CEO Eric Schmidt described the quarter as strong "despite a more challenging economic environment." That comment alone could be contributing to the sell-off.

Google is still spending money like a college student who just got a check from the parents. Its capital spending in the quarter was $698 million, most of which went to data centers, servers and networking equipment. That spending was down from $842 million in CapEx in the first quarter, however.

Here's some early reaction this afternoon to Google's numbers:

RBC Capital's Ross Sandler: "That's the problem with Google -- everybody thinks they're immune to an economic slowdown. They're not immune to deceleration." (Bloomberg)

Canaccord Adams analyst Colin Gillis: "It's hard to love the numbers. There's the initial shock of this being the best company in the space and it just fell short." (Reuters)

I'll update as more comments come in.

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Comments

 

Short sighted sellers will not make money in the long term.  The fact is that Googles PE is not the high.  The fact that they missed their numbers in an Economic slowdown is no surprise.  Apple and Google are best of breed.  Simply said their are the two best tech companies on this planet.  Traders only care about things week to week and quarter to quarter.  Google and Apple will be here for a very long time and a few years from now and a few splits later you will have made a great investment.

Scott Fayden

Desktop Support Analyst

scott fayden (Posted 07.18.08 3:13 PM) Report Abuse

Analysts make me sick. They can say anything they want and the market listens to them as if they were "all knowing sages." They are the ones who set the parameters and expectations for these companies, and are the sole "Trial,Judge, and Jury" for interprfeting their performance. The subjective nature of this process overrides any empirical objectivity that the actual figures may reveal, and lets these sooth-saying "stock pundits" call all the shots by either downplaying a "miss," or sensationalizing it. A company "beats," but it doesn't "beat" by enough."  Investors are getting hurt by these fools. We've got to find a way to grade these companies more fairly. Analysts, you've been given too much power.

JES (Posted 07.20.08 7:26 PM) Report Abuse

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