Mighty Google Misses - Update

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Mighty Google Misses - Update

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Google, which does not give guidance, missed both Wall Street’s top and bottom expectations for its December quarter by a hair and the punters immediately turned vicious pounding it down around 50 bucks after-hours.

Consensus demanded non-GAAP earnings of $4.44 on revenues of $3.45 billion. Google came in with $4.43 on revenues $3.39 billion.

Those revenues figures, which are what Wall Street uses, are net of what’s called TAC, Google’s traffic acquisition costs, the money it pays its partners, which it this case amounted $1.44 billion or 30% of its ad revenues, up from 26.1% and cutting gross margin a point to 35%.

Its GAAP revenues were $4.83 billion, up 51% year-over-year and up 14% sequentially. Its GAAP earnings were up 17% to $1.21 billion, or $3.79 a share, not as much as it usually gives back.

Seemingly on the bright side consumer ad clicks were up 30% year-over-year, 9% sequentially though Comscore says US clicks were down 7% between November and December, indicative perhaps of belt tightening.

Before Thursday night’s sell-off Google was wending its way back from a hideous January that had sheared $150 off its stock price and stood at $564.30. It was trading around $515 after-hours winding up at $524, down 7%, forecasting a possible nasty Friday for tech.

In a canned statement CEO Eric Schmidt said “We’re very pleased with our performance this quarter. It reflects strong momentum in our core business, growing receptivity to our new business initiatives and improved discipline in managing our operating expenses.”

In the conference call Schmidt said he was “optimistic about 2008” based on the company growing diversification and co-founder Sergey Brin claimed the company wasn’t impact by the economic slowdown.

However, CFO George Reyes confessed that Google is selling ads into social networking sites like Facebook and MySpace. It’s “not monetizing as well as expected” and causing higher-than-expected TAC.

International, where Schmidt said online advertising was “nascent,” represented 48% of total revenue or $2.3 billion.

Headcount was up only 889, giving it 16,805 bodies to feed.

Google said on the call that it was expecting to make “significant capital expenditures,” which must be that $4 billion and counting that it might spend buying airwaves from the government to deliver ads to cell phones.



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