Google Shares Plummet with Mistaken Release of Financial Results

NEW YORK | Friday, October 19th, 2012 1:30am EDT

It may be one of the world’s great hi-tech companies but Google saw its shares plunge after a “fat finger” computer mistake saw hugely disappointing results for the company released untimely.

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Google Inc’s quarterly results fell well short of Wall Street’s expectations after its core advertising business slowed. Photo by Kristina Alexanderson/Flickr

The disappointing numbers on Thursday came hours ahead of schedule in a rare instance of premature filing. Google blamed the misfire on an unauthorized filing by its financial printers, RR Donnelley & Sons Co. Later it confirmed the numbers’ accuracy. The company tries to make money in a mobile world.

The challenges of making money in a mobile world were not the only reason that Google’s net income and earnings per share fell significantly below analysts’ expectations. Motorola Mobility, the ailing cellphone maker it recently acquired, is bleeding money.

As The New York Times reports, Google was scheduled to release its earnings after trading closed, but because of a financial publisher’s error, the company mistakenly filed the report with the Securities and Exchange Commission several hours earlier than planned.

The stock price immediately plummeted more than 9 percent, or $68, before Nasdaq halted trading in its shares in the early afternoon. Shares ended the day down 8 percent and rose 1 percent in after-hours trading.

Google, which has been struggling to turn around a Motorola Mobility hardware business it bought for $12.5 billion, reported a 20 percent dive in net income to $2.18 billion. Excluding certain items, it earned $9.03 a share, extremely underperforming the $10.65 analysts had expected, on average.

As it became known, net revenue growth at Google’s main Internet business increased 17 percent year-over-year. And it is the first time growth in that business that has fallen below 20 percent since 2009.

Google Finance Chief Patrick Pichette emphasized on the conference call that the income growth rate was higher in case if the impact of foreign currency exchange rates was backed out.

Google executives tried Thursday reassure investors during the conference that it was prepared for the challenges from mobile, and that it was already shifting its business models to adjust.

“Monetization on mobile queries right now is a significant fraction of desktop,” said Larry Page, Google’s chief executive.

He also added that Google was exploring new ways to make more money because people increasingly used phones and tablets in addition to and instead of desktop computers. He said it was “uniquely positioned to get through that transition and to profit from it.”

The company said it was on track to earn $8 billion in the coming year from mobile, including ads and sales of apps. And it did not break down how much of that would come from advertising, but said it was a large majority.

According to The New York Times, the explosion of mobile users and ads has presented difficulties. Google has 55 percent market share in mobile ad revenue, and 95 percent for mobile search ads, according to eMarketer, the digital advertising research firm. Yet the ads cost less in large part because advertisers are not yet convinced that they are as effective as desktop ads.

But Ryan Jacob, who is a chairman and chief investment officer of Jacob Funds, said he viewed Google’s results as only “minorly disappointing,” with most of the weakness coming from Motorola as expected.

As it became known, the Federal Trade Commission is preparing a staff recommendation to sue Google over antitrust violations before the end of the year. So this week, European regulators notified Google that it faced penalties if it did not improve its privacy policy.

But Ryan Jacob, who is a chairman and chief investment officer of Jacob Funds, said he viewed Google’s results as only “minorly disappointing,” with most of the weakness coming from Motorola as expected.

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