Google shares suspended as premature results stun Wall Street
GOOGLE'S shares crashed by as much as 11pc this evening, after the web search giant published its results prematurely and exposed a 20pc fall in its profits.
The company, which earlier this month surpassed Microsoft in terms of value, saw its third-quarter profits slide because of spiralling costs and a decline in advertising prices.
The firm, which has its European headquarters in Dublin, delivered revenues of €8.6bn in the third quarter, but these fell short of analyst estimates of €9bn, whilst profits tumbled by a fifth on those made in the third quarter last year.
The results has been scheduled for publication after markets closed in New York, but they were accidentally released early, still with a gap for a quote from Google’s chief executive, Larry Page.
The release sent Google’s share price plummeting and the shares were soon halted, more than 9pc down at €525, amid fears that the stock would crash.
Google’s filings with America’s Securities & Exchange Commission revealed a worrying drop in the amount of money the technology giant receives for each advert users click on its websites.
Its average income per click fell 15pc over the three months to the end of September, sparking fears that it is losing traction with advertisers and failing to monetise internet usage on mobiles as efficiently as it has done on traditional personal computers.
Motorola Mobility, the mobile manufacturer acquired by Google, accounted for 18pc of Google’s revenues.
Google also revealed in the filings that it plans to make significant capital expenditures, reviving concerns over the amount of money it is spending on expanding its operation and hiring staff around the world.
The company’s total costs shot up by 71pc, despite commitments to cut staff in some of its divisions. Google said in August that it will axe around a fifth of the workforce at Motorola Mobility.
Analysts were alarmed by the amount the business had declined. "The core business seems to have slowed down pretty significantly, which is shocking. I don't think anybody saw this," said Sameet Sinha at B Riley.
She warned that the shift could be driven by a drop in Google’s popularity as a search engine, as people start searching more through apps. "That could indicate a secular change, especially when it comes to ecommerce searches. The big fear has always been - what if people decide just to go straight to Amazon and do their searches? And potentially that's what could be happening.”
Google rushed a statement out shortly after the results, saying that its financial printer, RR Donelly, had filed an early draft of Google’s results without authorisation.
“We have ceased trading on Nasdaq while we work to finalise the document. Once its finalised we will release our earnings, resume trading on Nasdaq and hold our earnings call as normal.”
Today’s hammer blow to investor confidence in Google is the second piece of bad news the company has received in as many days.
Yesterday, European regulators ordered the web search company to become much more transparent about how it uses people’s information, amid fears that it could be breaching privacy laws.
They have told Google to offer users a way of opting out of some of its most invasive methods for collecting and using data. The practices, for example its system of combining data from multiple different services, such as its YouTube video service or its social network, Google+, have also been crucial in helping Google to target advertising in a highly efficient manner.