goog12q3
q3 2012

Google Misses, Q3 2012 Revenue Up 45 Percent To $14.10B, Net Income Down 20 Percent To $2.18B

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Google’s earnings for Q3 ending on September 30 leaked in a SEC document. Revenues are up 45 percent compared to Q3 2011 and now represents $14.10 billion. However, GAAP net income is down 20 percent year-over-year to $2.18 billion, or $6.53 per share, compared to $2.73 billion for Q3 2011, or $8.33 per share. Non-GAAP earnings per share is at $9.03 compared to $9.72 year-over-year. Google falls short on expectations and the stock took a dive. Due to the leak, trading has been halted. Non-GAAP net income in the second quarter of 2012 is $3.35 billion, compared to $2.85 billion in the second quarter of 2011.

Analysts were expecting $14.7 billion in revenue. Google missed those estimates by $600 million. They also expected a non-GAAP EPS of $10.66 compared to $9.03 in reality.

Even though revenue is following an impressive trend, profits are not following the same trend and are the source of today’s disappointment. Motorola and its $527 million operating loss for Q3 2012 are becoming an increasing problem for Google.

Ads still represent a major part of Google’s business. With $11.53 billion, 82 percent of consolidated revenues come from the different advertising offerings.

Among Google’s unit, Motorola is becoming a major part of the company. Google bought Motorola Mobility last year for $12.5 billion. It now accounts for 18 percent of the revenue compared to 10 percent last quarter.

Yet, Motorola is a burden as well as Motorola records a $527 million GAAP operating loss. The acquisition added 20,293 employees. At that time, it represented a 59 percent increase in Google’s total headcount. Google reports 53,546 full-time employees as of September 30 compared to 54,604 as of June 30. Google directly employs 36,118 people, and 17,428 employees are in Motorola’s business unit. Google has cut around 1,000 jobs in a quarter, with Motorola taking a big hit.

Google-owned sites generated $7.73 billion of revenue, or 67 percent of the total revenue. That percentage is stable compared to Q2 2012.

As Google is famous for not giving out dividends, the company now has $45.7 billion in cash or cash equivalent. That money could be used to acquire startups and smaller companies for the product of talent.

With the Nexus brand and the recent release of the Nexus 7, Google is demonstrating that devices could be an important part of its business. Even though Asus manufactures the Nexus 7, Google is pushing hard to get the tablet in everyone’s hands. When it comes to devices, selling content and getting customers to use Google services are the main advantages behind that new strategy.

Google’s earnings call is scheduled for 1:30 PM PT today, but leaked early. There was apparently a mix-up with the 8K earnings statement. Here is Google’s statement on the matter:

Earlier this morning RR Donnelley, the financial printer, informed us that they had filed our draft 8K earnings statement without authorization.  We have ceased trading on NASDAQ while we work to finalize the document.  Once it’s finalized we will release our earnings, resume trading on NASDAQ and hold our earnings call as normal at 1:30 PM PT.

Details from the earnings call will follow this afternoon as executives will bring context to those numbers.