Remember last year when Google, Inc. (NASDAQ:GOOG) Chief Financial Officer George Reyes spooked Wall Street with talk about slowing growth? Google's shares plunged as panic set in and people wondered if the good times were over. Bullish analysts defended Google as if they were lawyers plea bargaining for a client. Eventually, all was forgiven and Google got back into Wall Street's good graces.
What gets lost in all of the Google hoopla is the fact that Reyes was right. Google's growth is slowing, even though it's still very robust. Revenue on a year-over-year basis jumped 79 percent, 77 percent, and 70 percent in the first three quarters of 2006 respectively. Will that trend continue?
Analysts are expecting the company to report revenue of $2.18 billion, an increase of about 14 percent from $1.92 billion a year earlier, when it issues fourth quarter results on January 31. These figures include traffic acquisition costs. Profit is expected to be $2.90, according to Thomson Financial. Growth is still remarkable even if it's less gravity-defying than it had been.
Now keep in mind that Wall Street analysts have a really poor track record in forecasting Google's earnings because the company gives them no guidance or much other information. Since the result of this usually has been "upside surprises," no one has complained.
Google investors seem to expect grand slam homeruns, hole-in-ones and three-point shots every quarter. That, of course, is too much to ask of any company.
Has Google hit the law of large numbers? In some ways yes, but in other ways the answer is still unknown. Google has many tricks up its sleeves to get a bigger slice of advertising spending including deals in radio and newspapers. Google also is moving onto the desktop and becoming more like a portal through offerings like Google Finance.
Microsoft Corp. (NASDAQ:MSFT) continues to pour huge amounts of money into its Internet business in a so-far unsuccessful effort to catch Google. Yahoo Inc.'s (NASDAQ:YHOO) can't flounder forever. Conversely, Google is encroaching on Microsoft's turf through applications like Gmail (which I use and like).
But remember, just because you like Google's offerings doesn't mean you should automatically like its stock.
Also check out some other earnings reports that we're following, and let us know your thoughts on earnings expectations.
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Reader Comments (Page 1 of 1)
1-19-2007 @ 5:25PM
John said...
Yes, but Google is getting into so many innovative ventures that the other internet companies aren't even thinking of. They are doing a number of joint ventures from companies as diverse as newspapers and NASA. They are an incubator using their search revenues to feed their other new ventures.
1-19-2007 @ 11:55PM
Randy Smythe said...
I think John is right on in his comments. Google is continually innovating and serving as an incubator for tomorrow’s applications. When Web 3.0 actually becomes a reality Google will be right in the middle of it.
One caveat! Google will need some of these inniovations to contribute substantially as revenue from search levels off.
1-20-2007 @ 11:49AM
Shujan said...
Google corporate search is a product which gives Google earning potential beside web search. This revolutionary software is used by corporations to do internal knowledge search of their vast multiplatform applications. One search can bring results by querying multiple applications across multiple databases.
1-21-2007 @ 9:41PM
mikey said...
google hits: search, adsense/words, gmail. google misses: portal, reader. break evens: desktop, finance. tbd: you tube. No one can beat google on search and pay-per-click, but that's really it from the company. Gmail is great, but it isn't that great. Desktop is a loser, MS gadgets and OSX widgets are where things are going. Google a one-hit wonder? Not that there is anything wrong with that. Way over-valued.
1-22-2007 @ 7:06AM
Budd Riley said...
Microsoft needs yhoo and I predict that in the near future a takeover is in the cards. Watchout Google!!!