Google expected to be on the mark
Sunday, 28 October 2007
Wendy Tanaka
Google's back. After a surprising second-quarter earnings miss, analysts expect the company to deliver blockbuster third-quarter results recently. Strong advertising sales growth from improved search technology and tighter controls on expenses--translation: not hiring every engineer in sight--should buoy the quarter.
Analysts expect the Mountain View, Calif., Internet giant to report nearly 58% net revenue growth over the last year, reaching $2.94 billion, excluding commissions paid to marketing partners. Analysts expect to see those sales figures translate into earnings of $3.78 per share--a healthy 44% increase--before nonrecurring expenses.
"We believe the most important change this quarter was changing its top ad placement formula to be based on an advertiser's maximum cost-per-click bid versus the actual paid," Lehman Brothers analyst Douglas Anmuth wrote in an Oct. 9 report.
Analysts also expect Google (nasdaq: GOOG - news - people ) to fess up to scaling back its hiring. During the four quarters ending in June, Google hired at a torrid pace, boosting head count by 74%, as pointed out American Technology Research analyst Rob Sanderson in a report Tuesday.
Gross revenue, by contrast, was up only 58% during the same time. That weighed down Google's operating margins, Sanderson noted--and kept the company short of Wall Street's expectations. A new accounting method that spreads out bonuses evenly throughout the year should help sweeten Google's third-quarter results.
Investors should also stay tuned in for Google's answers to a number of questions. For starters, veteran CFO George Reyes is leaving by the end of the year. So far, Google has been quiet about plans to name a successor.
And then there's the proposed $3.1 billion acquisition of DoubleClick. Regulators in both the U.S. and Europe are still scrutinizing the deal. Later this month, the European Commission is expected to either clear the deal or begin a formal investigation. The U.S. Senate has held one hearing on the antitrust implications of the deal. The Federal Trade Commission has yet to weigh in on whether the combination would give Google monopolistic power in the growing, lucrative online advertising market.
Google also wants to get into the mobile industry and plans to bid on wireless airwaves that will be auctioned off by the Federal Communications Commission next year. That could be an uphill battle, however, as Google is competing against telecom companies with decades of experience in this arena.
The rumor mills are also buzzing about a mobile phone service--complete with ads--that Google is likely to roll out next year. Word is Google is building its own software while working with Taiwanese handset manufacturer HTC and others to develop the hardware. Although company brass will likely keep mum on the project for now, official details could come out by Thanksgiving.
Google's back. After a surprising second-quarter earnings miss, analysts expect the company to deliver blockbuster third-quarter results recently. Strong advertising sales growth from improved search technology and tighter controls on expenses--translation: not hiring every engineer in sight--should buoy the quarter.
Analysts expect the Mountain View, Calif., Internet giant to report nearly 58% net revenue growth over the last year, reaching $2.94 billion, excluding commissions paid to marketing partners. Analysts expect to see those sales figures translate into earnings of $3.78 per share--a healthy 44% increase--before nonrecurring expenses.
"We believe the most important change this quarter was changing its top ad placement formula to be based on an advertiser's maximum cost-per-click bid versus the actual paid," Lehman Brothers analyst Douglas Anmuth wrote in an Oct. 9 report.
Analysts also expect Google (nasdaq: GOOG - news - people ) to fess up to scaling back its hiring. During the four quarters ending in June, Google hired at a torrid pace, boosting head count by 74%, as pointed out American Technology Research analyst Rob Sanderson in a report Tuesday.
Gross revenue, by contrast, was up only 58% during the same time. That weighed down Google's operating margins, Sanderson noted--and kept the company short of Wall Street's expectations. A new accounting method that spreads out bonuses evenly throughout the year should help sweeten Google's third-quarter results.
Investors should also stay tuned in for Google's answers to a number of questions. For starters, veteran CFO George Reyes is leaving by the end of the year. So far, Google has been quiet about plans to name a successor.
And then there's the proposed $3.1 billion acquisition of DoubleClick. Regulators in both the U.S. and Europe are still scrutinizing the deal. Later this month, the European Commission is expected to either clear the deal or begin a formal investigation. The U.S. Senate has held one hearing on the antitrust implications of the deal. The Federal Trade Commission has yet to weigh in on whether the combination would give Google monopolistic power in the growing, lucrative online advertising market.
Google also wants to get into the mobile industry and plans to bid on wireless airwaves that will be auctioned off by the Federal Communications Commission next year. That could be an uphill battle, however, as Google is competing against telecom companies with decades of experience in this arena.
The rumor mills are also buzzing about a mobile phone service--complete with ads--that Google is likely to roll out next year. Word is Google is building its own software while working with Taiwanese handset manufacturer HTC and others to develop the hardware. Although company brass will likely keep mum on the project for now, official details could come out by Thanksgiving.