From unexplained rise to falling off a cliff: Google shares halted as bottom falls out of their business model

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googlehalted

Google’s Q3 earnings report leaked out early today, resulting in a bloodbath for the stock, which fell 9% in the space of minutes, and causing trading on the shares to be halted.

The company reported a 20% drop in profits from last year, from $2.73 billion to $2.18 billion.

The company said it earned $9.03 a share vs the analysts consensus of $10.65.

Google is in the main an advertising company, and the  Average cost-per-click decreased 15% year-over-year and decreased 3% quarter-over-quarter, possibly as a result of the move to mobile of which the company is a huge proponent with the Android operating system, but which earn them hardly any money.

“The core business itself is slowing down,” said Colin Gillis, an analyst at BGC Partners LP.

The company’s Motorola revenue decreased 26% YoY to $2.58 billion, and lost $151 million, making their $12.4 billion purchase seem more and more a folly.

Analyst Piper Jaffray’s Gene Munster said:

“The miss appears to be on the core search side as Google sites revenue was up 2.5% q/q after being up an average of 8% q/q the past two years. CPC rates were down 15% y/y vs the Street at an 11.3% decline. An important takeaway is that the disappointment in CPCs will likely renew investor concern about mobile monetization. In the short term (through December), we now believe shares may be more range-bound between $650 and $700 while investors wait to see improvement in Q4.”

Google’s share price has risen nearly 30% over the last 3 months without any clear driver. It was believed they would not be affected by changes in the online advertising market.

The company recently briefly overtook Microsoft as the second most valuable tech company after Apple, but with a $23 billion difference in market cap at present this may have been extremely premature.

Via Barrons.com and Businessweek.com

Thanks Ben for the tip.



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  • B_Sack

    Just wait until the Apple Bubble bursts. You’ll see a cliff like you’ve never seen before :o

    • JoshC

      I’ve been saying that for a while now, what happens when the iphone just doesn’t do it anymore, it’s their only product (because the ipad is just a big iphone)

      • Bugbog

        The bigger possible issue is if, with the Windows 8 launch, this eats into Apple’s iPad sales, which may then have a knock on effect on iPhone sales?

        To some extent Apple is pre-empting this by releasing an iPad Mini. But unless Apple innovate their mobile platform (which may require kicking the Golden Goose’s nest) they may well fall behind, both perceptively and technologically.

        • JoshC

          The only problem there is it would be so easy for them to make a terrible misstep, they are in a very precarious position since they lost their guiding light. As we all know the last time Jobs left Apple they almost drove the company out of business.

          • Bugbog

            True. We may mock them, de-cry them, even vilify them. But the truth is, for every 40, 50, 60% of “Ego-maniacs” that drive a company into the ground, there are just a few top 10% that drive it to soar.

            It also goes to show it’s all dependent on the moment. Sometimes it works against you (when they kicked him out), and sometimes it works in your favour (when he came back!)

          • rsgx

            I guarantee that Jobs would’ve instilled a 5 year+ plan for the company to follow.

        • rsgx

          I think you’re underestimating Apple here. I know we like to give them a lot of flack, but they didn’t get to where they are by making stupid mistakes.

          They too have tricks up their sleeves, just like Microsoft.

          • Bugbog

            The problem is, especially from what we’ve seen of late, is that they recognise that they have a Golden Goose. As such, they have become quite reluctant to Rock The Boat, i.e. Innovate, rather than stagnate, as they are doing right now.

            As history has shown us, companies generally don’t recognise when they are stagnating (as don’t many of their ‘fans’). When you start iterating incrementally (which they have been doing), rather than taking risks and moving forwards hungrily (as if you have something to prove), then you run the risk of stagnating.

            And, even from fans, we have definitely heard some murmurs of discontent. And that only takes a few cycles before it turns itself into a meme, which becomes very hard to fight.

          • rsgx

            Just like MS surprised us with the Surface (and more to come, I’m sure), Apple will do the same.

            It’s funny how little we (I?) seem to be hearing about ‘iTV’ or whatever it may be called. If true (and very, very possible IMO), Apple stands to capture a whole other market by releasing a TV with something like iOS integrated into it. It would turn the TV market upside down in their favour.

          • Bugbog

            Therein lies [part of] the problem. Most/All rights-holders are now wise to Apple. The likelihood of them allowing Apple to proceed with something like “iTV” is quite unlikely, or the barrier to affordability may well be too high. With the manner in which the U.S. market functions, it is in their favour to stifle such a concept.

            If they can pull it off, all well and good. But I wouldn’t suggest you hold your breath!

            On other matters. I will gladly eat my hat if they can innovate a totally new concept, rather than the stream of incremental flashes that they’ve been doing for the last 2+ years.

          • rsgx

            Hmm, you may be right on that front. In my mind, it would be the way for Apple to tackle the TV media market.

            MS is heavily entrenched with the Xbox from a gaming perspective, and is moving more into TV and content.

            Google is more centered around content IMO, and by launching fibre are tackling the market from the other end (where games can be ported over to their Google TV services).

            Apple has the opportunity to come right between these 2 by releasing a ‘high-end’ TV with both media and games, taking them both on at the same time and no one would ever see it coming.

            Just a theory on my part.

            I’m glad MS is starting to turn things around though, it’s going to be good for us whether we like them as a company or not.

      • rsgx

        Sorry, but go ask people who use iPhones, why they use iPhones.

        You’ll hear, “Because it’s an iPhone” on more than one occasion.

        • JoshC

          Oh i know that’s my point what will happen when those people don’t care anymore i don’t think that zombie customers are a sustainable business model. Also as we have seen the innovation from Apple has severely slowed a I don’t see that improving w/out another Steve Jobs

    • PoohGQ

      It may not be too long now as Surface RT & Pro may be the Apples worst nightmare..

    • rsgx

      Apple shares will keep climbing. I’ve doubled my investment since I bought into them.

      It’s great, because the fans sell the products for them too.

      • http://twitter.com/nitesh_maharaj Nitesh Maharaj

        I know of many, including myself, who will be moving away from Apple. They had the best products, so I got an iPad, a MacBook Pro and an iPhone, but the market has caught up. Without Steve Jobs, Apple can only take tiny steps forward. They’ve got a businessman running the company now, as opposed to the visionary who blazed a trail. Apple is riding the crest of a wave, one that’s quickly closing in on itself.

        • rsgx

          I can’t name a single laptop that can match a Retina MBP, as much as I hate to admit it. As of now, this is about the same truth as an iPad and an iPhone.

          Android has had more features for years. But as for a solid, stable ecosystem, right now, no one matches Apple. I have a feeling MS might change that if they do it right, but that’s another topic.

          • Bugbog

            So. They’ve managed to leverage their supply volume into obtaining a higher resolution screen than other segments of the market! Is that it?

            This is but a partial spec. gain vs other competitors. Envious to some, but just a reverse of what the PC (and Mobile) market had in years past before Apple gained this slight upper-hand.

            The main thing that can be lauded is their cohesive device eco-system. Once that is matched by Microsoft (with Windows 8), then I don’t think a “Retina” display will be enough to save them being slowly bested.

          • rsgx

            It’s not only ‘retina’. It’s one of the thinnest laptops on the market, with the highest resolution screen, Thunderbolt, USB 3.0 and HDMI ports, a touchpad no one has been able to match and an ecosystem to compliment it.

            I’m not fan of laptops (sold mine a few months ago, preordered the Surface) and my desktop is a self-built PC, but Apple is still well above any manufacturers when it comes to hardware – as of right now.

            But your point is right on, I’m not disagreeing with you. I’m saying that they still have a way to go before they ‘stagnate’.

            I think that MS is going to produce hardware that will put them head-to-head with Apple.

    • grs_dev

      Apple actually has profitable products. Google doesn’t…

  • Oli

    Falling of a cliff?

    That cliff should watch where it’s walking.

  • rsgx

    That picture is hilarious.

  • http://www.facebook.com/people/Rikkirik-Contrera/100003341041631 Rikkirik Contrera

    Apple and Google have reached the cliff and are going down from here on. The introduction of W8 will kill the tablet market, especially for Android, but also for Apple, both will suffer enormous. With more than 1.5 billion Windows PC users to upgrade to W8 (RT of Pro), most of them will choose a hybrid form of PC/tablet, Notebook or Ultrabook. The pricepoints of hybrid W8 devices (PC and tablet in one) gives the consumer great value when compared to buying a tablet and PC seperately. These PC/tablet or hybrid W8 formats will greatly decrease consumer demand for a standalone tablet (read Android tablets and Ipads). Furthermore, the integration features of W8 across devices, services and applications and their security features (incription technology) blows the competition away. A recent survey shows that more than half of US IT managers are planning to standardize their applications with W8 PC and tablets, 75% of these managers are working for companies with more than 500 employees.
    The ability to make Skype phone calls as if you are making a normal phone call will kill the competition when it comes to W8 phones, PC and tablets (not to mention the Pureview technology of Nokia). With nearly a billion Skype users, this feature has made Skype more attractive to consumers and businesses. Skypes subscribtion will explode and W8 will benefit off this. W8 will become the fastest selling product ever, despite all the negativity around it. When Microsoft bought Skype their was so much negativity about this, but any person with a sound mind and a vision of the future would expect Micorsoft to integrate Skype fully in WP as if it was a normal phone. This is great news.

    • http://www.facebook.com/people/Njoi-Fontes/590077451 Njoi Fontes

      While I agree with you and by following logic alone this is indeed what should happen, I will my fingers crossed so that nothing unexpected happens to stop this future from becoming reality. For now I can be happy knowing that when I get my lumia 920 and Surface Pro I will, without a shadow of a doubt, have the best phone and tablet in the world.