Shares of Google Inc. (GOOG) fell nearly 5% during after-hours trading as the world-wide leader in Internet search reported Q1 earnings that were unable to meet Wall St.’s lofty expectations. The Q was in fact a beat, as EPS rose 37% year-over-year to $6.76/share excluding one-time items on revenue of $6.78 billion. U.S. paid clicks rose 15% YOY and 5% sequentially, though costs per click rose 7% and 4%, respectively. Analyst estimates sought EPS of $6.60 on revenue of $4.95 billion.
Generally speaking it was a very solid quarter, but when it comes to stocks like GOOG, “solid” is rarely good enough, and perhaps reasonably so. This time around it was growing costs that irked the Street. GOOG, whose spendthrift nature has worried investors in the past, had seemed to have begun ‘righting the ship’ in terms of focusing on its core businesses. But higher operating costs driven foremost by the largest number of quarterly new hires since Q1 ’08 seem to have worried some that the company is returning to its old ways. Add in CEO Eric Schmidt’s unannounced absence from the call and the ever-looming China debacle and suddenly the EPS and rev don’t mean nearly as much. At least for now.
For what it’s worth, CFO Patrick Pichette stated that revenue from China was “immaterial,” noting that Google’s 65% U.S. market-share was where the company printed its cash. He also noted that GOOG’s Android business has been picking up, with over 34 devices now running the software and over 60,000 Android-enabled phones being activated daily. Nexus One sales number were not released, but an Android-enabled netbook can be expected to hit shelves this Fall.
Shares finished up the after-hours session down $29.10, good for a 4.89% loss. These large moves are not uncommon for GOOG following quarterly reports, but one cannot deny that the company has lost some of its mojo over the past few months. Depending on which side of the aisle you reside, GOOG seems to be offering some good opportunities for both Longs and Shorts…
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