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Google Missed? No... The Analysts Missed

The Market

from the back-to-work dept

Wed, Feb 1st 2006 12:07pm — Mike Masnick
We seem to be one of the few sites that didn't mention the big "miss" by Google in its earnings, but that's because, honestly, it didn't seem like that big of a deal. The growth was still tremendous. The real issue was simply that the Wall Street analysts did a bad job predicting how Google would do -- which isn't that surprising, since Google made it clear from the beginning that, unlike many other firms, it wouldn't make too much of an effort to give Wall St. really detailed info for future estimates. In other words, the "problem" isn't Google's, but an over-anxious Wall Street who wanted to believe Google could continue to defy gravity. That's why it's good to see that the "miss" doesn't seem to concern most folks in Silicon Valley, who can see through the Wall Street prism to recognize that this "hiccup" has almost everything to do with forecasting, rather than problems within Google.
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12 Comments

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  1. identicon
    mike m, 1 Feb 2006 @ 1:24pm

    googles earnings miss

    While I do think the analyists had their sites set too high on Google, the CFO should have let the street know that Google's tax rate was up into the 40% range, therefore hurting the bottom line and ruining expectations. Google has a history of releasing confusing and poorly worded earnings reports to the street, and the shareholders suffered for that last night and today

    [ link to this | view in thread ]

  2. identicon
    haggie, 1 Feb 2006 @ 1:26pm

    No Subject Given

    Wall Street didn't have any choice but to predict that level of earnings or look fooolish. Google, on the other hand, didn't have any motivation to meet earnings expectations. And has actually said that they would NOT be influenced by them. Hence, the disconnect. The small drop in Google's price is the price of disillusionment in Wall Street analysts.

    By NOT colluding with Wall Street, Google shows just how much collusion there really is.

    [ link to this | view in thread ]

  3. identicon
    The Truth Beacon, 1 Feb 2006 @ 1:31pm

    Article is spot-on

    I am so glad that someone who shares news has finally realized the true story. The problem is not that Google, who provides a free service, didn't make enough money, but that Wall Street WANTED them to make more than they did. Google still made out like a burgler hitting an unarmed, unwatched, unstaffed and fully open bank containing money the likes of Fort Knox.

    [ link to this | view in thread ]

  4. identicon
    Andre, 1 Feb 2006 @ 1:38pm

    All things Google

    This is what I hate about Wall Street analysts; they much favor growth over profitibility. A highly profitable company with little growth (i.e. Microsoft) has it's stock negatively impacted, while a limited or no profit company with huge growth (even if it is still losing money) sees large increases in stock price. I also don't see how Googles stock price can be sustained. After all, at its core, Google is still a company that derives 98% of its revenue from a service that customers hate - advertising!

    [ link to this | view in thread ]

  5. identicon
    Michal, 1 Feb 2006 @ 1:46pm

    Re: googles earnings miss

    >> shareholders suffered

    Only shortterm shareholders suffered
    The stock is worth twice as much as it was worth in April.

    [ link to this | view in thread ]

  6. identicon
    Ro, 1 Feb 2006 @ 2:18pm

    Not a Google issue?

    Mike can you explain how a 4% drop in operating margin isn't a problem for Google? Controlling costs is one thing Wall Street has no control over...

    [ link to this | view in thread ]

  7. icon
    Mike (profile), 1 Feb 2006 @ 2:31pm

    Re: Not a Google issue?

    can you explain how a 4% drop in operating margin isn't a problem for Google? Controlling costs is one thing Wall Street has no control over...

    There are two separate issues here, so let me separate them out.

    First, there are plenty of reasons why there might be a 4% operating margin drop when you have a company that's not thinking quarter-to-quarter, and that's not necessarily worrisome. Honestly, while margins are important for profitability, the obsession over variance in margins is overblown.

    Second, and much more to the point... who cares? The point wasn't that Wall Street "had control" over everything that happened at Google. They obviously don't. But that it was Wall St. that set the expectations that weren't met... not Google.

    [ link to this | view in thread ]

  8. identicon
    Carey Osmo, 1 Feb 2006 @ 4:34pm

    Good For Me

    What's the big deal? It was a miss and hit. This is a benefit to investors, Google will get their pie back. Those who sold were probably highly strung on caffeine.

    [ link to this | view in thread ]

  9. identicon
    Mathew Ingram, 1 Feb 2006 @ 5:38pm

    Google

    Mike, with all due respect I think you (and many of your readers) are missing the point. It's not that analysts set their targets too high for Google -- which they undoubtedly did. It's that the company got its tax rate wrong in a big way, and that could be a sign of a bigger issue. Why did it get the tax rate wrong? Because it didn't sell as much in Europe as it thought. That's the real issue. Is it a big deal? Maybe not. But it's not Wall Street's fault.

    [ link to this | view in thread ]

  10. identicon
    Mousky, 1 Feb 2006 @ 6:36pm

    Re: googles earnings miss

    Suffered how? What was the price of a Google share during the IPO? What is at today? No one has suffered.

    [ link to this | view in thread ]

  11. identicon
    TechTrader, 1 Feb 2006 @ 9:08pm

    Man, absolutely no props on this!

    What does a blogger got to do to get recognized for making the call? In fact, I made the call in time for PEOPLE TO ACTUALLY TRADE IT AND MAKE MONEY! I guess I'm not part of the "in crowd".
    Check the time stamp...(PST)
    http://techtrader.blogspot.com/2006/01/google-earnings-good-ah-trade-long.html

    [ link to this | view in thread ]

  12. identicon
    Jeff Clavier, 2 Feb 2006 @ 10:37am

    Re: Not a Google issue?

    I found that Henry Blodget's analysis was actually one of the most on point, essentially pointing out that whilst the results were still spectacular, the growth was decelerating and further growth might require more work (as in the low hanging fruits have been consumed) and hence pressure earnings.
    The only real surprise was the 25% difference on the tax forecast.

    [ link to this | view in thread ]


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Secret Watermarking Standard Congress May Require Sucks By Its Own Measures
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