The GOOG Disappoints Analysts (Again)

Google
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3:00 AM EST April 17th, 2014

Despite touting Q1 2914 as “another great quarter,” Google’s stock took a 5% tumble following a first-quarter earnings came in below analyst expectations.  Analysts had predicted the search giant would take in $15.52 billion in revenue in Q1 with $6.40 earnings per share.  Google whiffed on both, taking in $15.42 billion with $6.27 earnings per share.

The Q1 results strongly indicated that the widespread of adoption of mobile is hitting Google hard.  The average cost-per-click for ads on Google and sites in its network has dropped by around 9 percent since this time last year and remained essentially static with the last quarter of 2013. Because mobile devices have small screens,  the number of displayable ads on them is limited, making ad buyers more wary of them.

Despite disappointing experts and soothsayers, Google remains highly optimistic

“We completed another great quarter. Google’s revenue was $15.4 billion, up 19% year on year”, said Larry Page, CEO of Google in a release statement.  “We got lots of product improvements done, especially on mobile. I’m also excited with progress on our emerging businesses.”

Investors, however, failed to share Mr. Page’s optimism and Google’s stock to a hit in after-hours trading as soon as the results were announced.  This is an aberration for the search giant, whose shares have gained more than 40 percent over the past 12 months.

The news was not entirely bad for Google, though average cost-per-click ads have dropped, the drop-off between Q1 2014 and Q1 2013 is less pronounced than the drop-off between Q4 2013 and Q4 2012. Google also saw the number of “paid clicks” climb 26 percent year-on-year in the first quarter.

The biggest Q1 2013 to Q1 2014 change was a dramatic slowing in the company’s “other revenue” segment.  “Other revenue,” includes the mobile Play store and hardware such as Chromecast and Nexus.  “Other Revenue” grew by 48% in Q1 2014, down from 99% growth in Q1 2013.

Google will also be backing away from some investments that have been less than totally successful for the company.  On the chopping block is the Motorola smartphone unit, which is to be sold to the Lenovo Group Ltd. for $2.91 billion, despite the fact that they bought it for a little more than $12 billion in 2012. Google retains the patents.

The company also will continue on it aggressive expansion march.  Earlier this week Google purchased solar-powered drone maker Titan Aerospace for an undisclosed sum to help them deliver wireless Internet access worldwide. The move came as rival Facebook announced their plans to build solar-powered drones with the capability to beam-out Internet access.

Google also made its much buzzed about Google Glass product available for a special one-day preview sale, and reports that white frames have already sold out.  Google is also thinking about the more appearance conscious potential Google Glass enthusiasts, and also filed a patent early this week that describes a camera-enabled contact lens.

It remains to be seen if consumers will find a Google with a massive fleet of solar powered drones and devices that can be laid directly on ones eyes to be extremely helpful, or slightly creepy.

 

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