Thursday, April 16, 2009

Google (GOOG) Solid; Posts First Sequential Decline in Sales

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As I often write, I am fascinated by the obsession with technology stocks over the years; most are glorified industrial companies with cyclical growth once they go through their hyper growth younger days. For example, right now everyone is rushing into semiconductor stocks because that's the "playbook" when a recession is ending. Yawn. But I guess electronic thinga-magigs are cooler than industrial widgets. While there are some solid growth companies in tech, and a few that will dominate more and more of our lives as we increasingly go electronic, it is sort of sad to see that even Google (GOOG) has reached the point where cutting jobs is the way to make "the number"... and for the first time in history it had a sequential drop in sales. Ah, even the Googler is not immune to the business cycle. That said, these are the type of number 98% of companies would dream of in this environment - especially considering at heart this is an advertising company in a world where ad rates are suffering considerably.

Before I post some quick hit analysis a very interesting chart set up (the stock is about flat in after hours after an initial burst upward on the typical knee jerk reaction to nothing more than a headline "beat"). The stock actually had two very bullish changes - first, a double top @ $380 was breached today; and this also was a recapture of the 200 day moving average. Two concurrent flags in the ground for the bull army.

But in this extremely overheated market we'll see if Google can hold onto this set up; I don't think charts are meaning much the past few weeks as people race into stocks to gain exposure... combined with the shorts jumping off cliffs to save themselves from the bull.

Some views of the results - via TheStreet.com
  • Google (GOOG Quote) blew past analysts' profit estimates with a strong first-quarter performance but registered its first sequential quarterly decline in sales. The Internet search shop posted adjusted earnings, excluding one-time items, of $1.6 billion, or $5.10 cents a share. That's up from pro forma earnings of $4.84 in the year-ago quarter and more than the $4.93 profit analysts had expected, according to Yahoo! Finance.
  • Sales for the quarter, minus traffic acquisition costs, were $4.07 billion, down from the $4.22 billion in the fourth quarter and ending Google's sequential growth streak. Analysts had expected sales of $4.08 billion.
  • The company saw healthy growth in paid click advertising. The number of ads placed on sites grew 17% from year-ago levels and were up 3% from the prior quarter.
  • In a rare, if not unprecedented move, Google reduced its staff size by 54 employees in the quarter. Google says it has 20,164 full-time employees, down from 20,222 at the end of the year.
  • "The economic situation remains difficult and it's a tough economy out there, said CFO Patrick Pichette, "and that continues to be uncharted territory in so many dimensions."
  • Google generated $2.25 billion in cash in the first quarter, up from $2.12 billion in the prior quarter and now has $17.8 billion in the bank. (nice war chest) "Cash in not burning a hole in our pocket," Schmidt said on the conference call. "We continue to evaluate," he said, adding "our view at the moment is to remain conservative."
Via Bloomberg
  • Famous for its free meals and benefits, Google has taken a harder line on expenses, cutting research and marketing costs. While sales rose 6.2 percent, Google’s total expenses were little changed from last year, at $3.63 billion. The company has eliminated sales jobs and is shutting down its newspaper and radio ad units. Chief Financial Officer Patrick Pichette said in February that the company was avoiding luxuries such as business-class flights. Still, Google will continue to offer some of its famous perks, including free meals, because they foster good communication among employees, he said.
  • Revenue from outside the U.S. made up 52 percent of total sales, up from 50 percent in the fourth quarter.
  • U.S. online advertising spending growth will slow to 4.5 percent this year, according to New York-based research firm EMarketer Inc. That’s down from 10 percent in 2008.
  • Growing search volume last month may have helped make up for a decline in ad prices, said Clayton Moran, an analyst with Benchmark Capital in Boca Raton, Florida. The number of online searches surged 9 percent in March over February, according to ComScore Inc. of Reston, Virginia.
  • Google, which gets almost all its sales from online searches, handled 64 percent of U.S. queries in March, according to ComScore. Yahoo! Inc. was No. 2 with 21 percent, and Microsoft Corp. had 8.3 percent.
Via Barrons
  • “No company is recession proof,” he said. “Google is absolutely feeling the impact.” He said people are still searching, but they are buying less. “They are doing what you would expect them to do,” he said. Schmidt said advertisers are still spending, bidding lower to adjust to a lower ROI. “User and advertiser behavior is entirely rational,” he said.
No position

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