Google Slips Earnings Out Early, Metrics Sink the Ship

Google Inc. (NASDAQ: GOOG) must have found out that someone knew its earnings report ahead of time because the internet search giant and Android O/S leader released its SEC Filing early. The comparable non-GAAP earnings in the third quarter came to $9.03 per share, down from $9.72 per share a year ago. The comparable revenues on an ex-TAC basis would be about $11.33 billion. Thomson Reuters had estimates of $10.65 per share and $11.86 billion. This is a huge disappointment when you consider that Google recently saw its stock hit an all-time high.

Google reported total revenues rose 45% to $14.10 billion for the quarter, but that is before deducting traffic acquisition costs (TAC) of $2.77 billion, or 26% of advertising revenues, in the quarter. Non-GAAP operating income and non-GAAP operating margin: In the third quarter of 2012, the expense related to SBC and the related tax benefits were $715 million and $155 million compared to $571 million and $116 million in the third quarter of 2011. In the third quarter of 2012, restructuring and related charges recorded in our Motorola business were $349 million, and the related tax benefits were $76 million.

Motorola revenues were $2.58 billion ($1.78 billion from the mobile segment and $797 million from the home segment), or 18% of consolidated revenues in the third quarter of 2012. The GAAP operating loss for Motorola was $527 million ($505 million for the mobile segment and $22 million for the home segment), or -20% of Motorola revenues in the third quarter of 2012. Non-GAAP operating loss for Motorola in the third quarter of 2012 was $151 million, or -6% of Motorola revenues.

Google revenues from outside of the United States totaled $6.11 billion, representing 53% of total Google revenues in the third quarter of 2012, compared to 54% in the second quarter of 2012 and 55% in the third quarter of 2011. Google revenues in the third quarter would have been $136 million higher without the impact of currencies. Google-owned sites generated revenues of $7.73 billion, or 67% of total Google revenues. This represents a 15% increase over third quarter 2011 Google sites revenues of $6.74 billion. Google's partner sites generated revenues of $3.13 billion, or 27% of total Google revenues. This is a 21% increase from third quarter 2011 Google network revenues of $2.60 billion. Aggregate paid clicks rose 33% from a year ago and increased approximately 6% over the second quarter of 2012. Average cost-per-click decreased approximately 15% over a year ago and decreased approximately 3% over the second quarter of 2012. Operating expenses, other than cost of revenues, were $4.81 billion in the third quarter, or 34% of revenues, compared to $3.28 billion a year ago, or 34% of revenues. Cash, cash equivalents, and short-term marketable securities were $45.7 billion at the end of the quarter. Google employed 53,546 full-time employees (36,118 in Google business and 17,428 in the Motorola business) at the end of the quarter versus 54,604 full-time employees as of June 30.

Google shares are now down about almost $70 or down 9% at $687.30 against a 52-week range of $556.52 to $774.38. What a blunder.

JON C. OGG

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