A mistimed SEC filing and weaker-than-expected results ahead of Google’s third-quarter earnings call resulted in market panic and shaved off 8% of Google’s stock value.
Financial printer R.R. Donnelley & Sons Co., which publishes SEC filings for Google and other companies, mistakenly filed Google’s Q3 2012 results with the SEC and issued a press release way ahead of schedule. The SEC filing was close to the one that Google finally filed, while the press release was still in an obvious state of unreadiness, with one sentence reading “PENDING LARRY QUOTE”, likely referring to a press quote from Google CEO Larry Page.
The filing, which happened several hours before Google’s earnings press conference at 4:30 pm Eastern time, set the market in a panic and in selling mode. Trading on Google’s stock (GOOG) had to be paused during the day due to the panic selling, which shaved off more than $20 billion off Google’s market cap.
It was just the mis-timing though. Google’s results, which were lower than market expectations, stunned the market. Google reported $2.18 billion in income on $14.1 billion in total revenue. While the revenue figures were off by about $600 million (analysts predicted $14.7 billion in revenue), it was the income that threw investors off guard. Google’s earnings were $9.03 a share, compared to market expectations of $10.66, which were about 15% higher.
Motorola and Mobile Ads a Drag on Performance
During the afternoon earnings call, Google CEO Larry Page struck a positive tone, saying that the company’s earnings had grown 45% year-over-year compared to the same quarter the previous year, adding that “at just fourteen years old, we cleared our first $14 billion revenue quarter. Not bad for a teenager!” Page spoke in a hoarse voice, indicating that he had still not completely recovered from a voice disease that resulted in his inability to speak earlier this year.
More importantly for analysts, Page noted that the run rate for revenues from mobile was “now over $8 billion.” The figure that Google stated last year was a $2.5 billion mobile run rate, but this year’s figures include revenues from Google Play and other mobile payment services.
While Google’s core business and revenue from ads was strong, the company appears to be seeing lesser cost-per-click (CPC) for its ads, particularly due to an increase in mobile ads. CPC rates declined 15% year over year, even as the company’s total revenue and impressions from ads grew.
But more worrying for investors is the state of Motorola, the ailing smartphone and electronics maker which Google purchased for $12.5 billion last year. The division lost $151 million in the third-quarter and an additional $349 million on restructuring charges on revenues of $2.58 billion.
Despite the higher-than-expected loss, most market analysts took a neutral and unchanged view of Google in light of its Q3 results. Doug Anmuth at J.P. Morgan reported, “while still light overall, Google numbers are not as bad as they initially appeared.” Mark Mahaney at Citigroup noted that the results were “not thesis changing, in our view.”