Google shock profit slowdown: Shares suspended after results blunder

19/10/2012

Google saw nearly $20bn wiped off its market value in minutes yesterday, after third quarter earnings figures released prematurely by mistake revealed a surprise drop in profit growth. The web giant reported a 20% drop in net income to $2.18bn (£1.36bn) between July and September. But the announcement, which was expected after the market close, was released early after financial printer RR Donnelley filed a draft of its earnings statement without authorisation on Thursday morning.

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That resulted in $19.8bn (£12.33bn) being wiped off its value by the market close and trading being halted on the Nasdaq after losses prompted the share price to plummet by up to 10% at some stages.

Google also reported net revenue - excluding traffic acquisition costs - of $11.3bn (£7.04bn) for the third quarter of 2012, below Wall Street expectations of around $11.9bn (£7.41bn).

A spokesman said: "Earlier today RR Donnelley, the financial printer, informed us that they had filed our draft 8K earnings statement without authorisation.

"We have ceased trading on Nasdaq while we work to finalise the document.
"Once it's finalised, we will release our earnings, resume trading on Nasdaq and hold our earnings call as normal at 1:30 Pacific Time."

‘Pending Larry Quote’

The company's draft results statement, filed with the Securities and Exchange Commission, was published at 09:30 Pacific time (16:30 GMT), three-and-a-half hours ahead of schedule.
It says "PENDING LARRY QUOTE" at the beginning, referring to chief executive Larry Page and indicating that it was not ready for publication.

Google chief executive Larry Page apologised to analysts on a conference call after the market closed.

"I'm sorry for the scramble earlier today," he said, adding that the company had had a strong quarter.

Its final results statement, published at 12:00 Pacific time (19:00 GMT), included the following quotation from Mr Page: "We had a strong quarter. Revenue was up 45% year-on-year, and, at just fourteen years old, we cleared our first $14bn revenue quarter.

"I am also really excited about the progress we're making creating a beautifully simple, intuitive Google experience across all devices."

Net revenue rose to $11.3bn from $7.5bn, but was still below forecasts.

Including websites that generate traffic for Google's ads, revenue rose 45% to $14.1bn.

When trading resumed, the shares recovered slightly to end the day 8% lower.

A boost for Microsoft and Apple?

Google recently overtook Microsoft Corp to become the second-largest US technology company behind Apple.

It has been struggling to turn around loss-making Motorola Mobility it bought for $12.5bn (£7.78bn). Costs related to the acquisition - for employee stock compensation and restructuring charges - knocked Google's overall results, as did the strong dollar.

Microsoft also revealed its quarterly profit fell by a more than expected 22%, as sales of computers running Windows operating systems dipped.

Shares in the company fell by more than 2% in after-hours trading, with sales of PCs expected to fall this year for the first time since 2001 up against strong competition from Apple's iPad.
Microsoft is betting on the release of touch-friendly Windows 8 to boost flagging sales when it launches next week.

It said first quarter profits fell to $4.47bn (£2.79bn) and sales fell 8% to $16.01bn (£9.98bn).

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