Google's results fall short, rare miss pummels shares

Thu Jan 19, 2012 6:34pm EST
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By Alexei Oreskovic

SAN FRANCISCO (Reuters) - Google Inc's quarterly results fell short of Wall Street's heightened expectations for the holiday season as Europe's economic malaise weighed, a rare miss that triggered a 9 percent slide in its shares.

The No. 1 Internet search engine underperformed on both revenue and earnings in the fourth quarter, disappointing investors who had counted on record U.S. online-commerce to prop up results.

Its shares dived to about $583 in after-hours trade. Several analysts zeroed in on an 8 percent drop in cost-per-click, or money paid by advertisers to the company, versus analyst estimates of a slight increase.

"Expectations had got ahead of themselves for Google, largely because investors don't have a good feel for what happens outside the U.S.," said Stifel Nicolaus analyst Jordan Rohan. "North America has remained strong, but there are parts of the world where there's a lot of economic pressure.

"I would have to assume Europe -- particularly Germany and some others undergoing austerity measures -- the underlying demand in those countries is weak."

Google's net revenue, which excludes fees shared with partner websites, was $8.13 billion in the fourth quarter, versus $6.37 billion a year earlier. Analysts polled by Thomson Reuters I/B/E/S were looking for $8.4 billion.

That shortfall marks an unusual slip-up for a company that has exceeded Wall Street's revenue targets for eight consecutive quarters.

The number of clicks on Google's search ads increased sharply during the last three months of the year, but the cost per clicks -- the money that Google charges advertisers for the ads -- decreased 8 percent from the third quarter and 8 percent from the year ago period.   Continued...