On Thursday Google Inc.’s share price dropped a whopping 9% in minutes after third quarter results were released prematurely by R.R. Donnelley and sons, Google’s filing agent. The third quarter reports were disappointing mainly because of a reported 20% drop in earnings per share. Also, Google earned 11.33 billion dollars in advertising instead of analysts predicted 11.86 billion dollars.
Occurrences like this remind one of the importance of financial accounting and reports; Google’s extreme case demonstrates the power numbers carry. The leaked report indicated shrinking profits and rising costs (specifically in recently acquired Motorola), which caused investors to panic and dump shares. However, investors largely ignored the fact company revenues were up 45% from last year, a sign that the company is still growing and a positive CEO Larry Page emphasized. However, a fall in cash flow from last quarter is another negative and Google should be careful not to stray too far from their original business model with new projects.
My personal opinion is Google was bound to correct at some point after rising from 695.00$ to 747.24$ in just five weeks, and financial statements, including quarterly reports, help ground traders in financial reality, something hype easily strays from.
Articles:
http://news.investors.com/technology/101912-630017-goog-falls-as-earnings-disappoint.htm
http://investor.google.com/earnings.html
Image:
Google Inc. “Google Logo.” Logo. KurzweilAI.Net 10 Feb. 2012. 20 Oct. 2012
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