It's hard to imagine a brand name more associated with today's high-tech, constant-connection world than Google. From a simple search engine the company has soared into software with its Android mobile operating system, advertising, applications for businesses, cloud storage and even into electronics manufacturing with its Nexus phones and tablets and its acquisition of Motorola Mobility.
So "earnings short of expectations" are not words generally associated with the Mountain View, Calif.-based giant founded by Sergey Brin and Larry Page in 1998.
Nevertheless, third-quarter results for the company released on Thursday sent its stock plummeting, with revenue from ads down 15 percent year over year for the fourth consecutive quarter. Third-quarter gross revenue was $14.1 billion, up 45 percent from the same quarter last year, and net revenue was $11.33 billion, up from $7.51 billion, according to The New York Times.
But net income dropped from $2.73 billion to $2.18 billion. Trading in Google stock was suspended for two and a half hours after the stock began plummeting when the results were released (in error) before the close of trading. Google closed at $695, down 8 percent.
Motorola Mobility, which was acquired this year by Google, showed an operating loss of $527 million for the quarter, up from $233 million in the second quarter.
CEO Page tried to put a good spin on the results in a statement Friday.
"We had a strong quarter," he said. "Revenue was up 45 percent year-on-year and, at just 14 years old, we cleared our first $14 billion revenue quarter. I'm also really excited about the progress we're making creating a beautifully simple, intuitive Google experience across all devices."
Analysts note that tech companies can't help but have their ups and downs in such a fluid market.
Riding the Wave
"One important thing to remember is every company rides a growth wave, first up then down the other side," said consultant and commentator Jeff Kagan. "Remember companies like RIM with Blackberry and Nokia, who were growing and No. 1 for more than a decade, suddenly struggling as both Apple iPhone and Google Android took their place a few short years ago?"
But Kagan noted that the company needs to maximize its profit from mobile advertising, which is less lucrative than ads for computers. Advertisers are willing to pay less even as the number of clicks per ad increases, because it is assumed that mobile-device advertising doesn't have much penetration. (continued...)