Bad Search Results

An Internet stock tumbled early
When missed earnings leaked prematurely.
It's bad to surprise,
But if profits should rise,
The stock would go up again, surely.

The stock market was gripped by a thrill of panic Thursday, when Google's 3rd quarter earnings announcement was leaked during trading hours instead of after the 4:00 PM close. However, it was not just the slip-up by $GOOG's financial printer R.R. Donnelley that roiled the market, but the news itself: a 20% fall in profits and slowing revenue growth. Like fellow internet behemoth Facebook, Google is having some challenges in building ad revenue from increasingly popular mobile usage to the extent that it has from the desktop. There is hope for the future, though; CEO Larry Page, on the earnings conference call, enthused over the "tremendous innovation in advertising, which I believe will help us monetize mobile queries more effectively than desktop today." So, $GOOG shares, which closed down 8% on the day, may soon resume their upward trend.

In the meantime, the company has built up its cash pile to $45.7 billion, an amount large enough to -

• Pay for all of the e-commerce in China during the second quarter of this year;
• Bail out Bank of America;
• Close the funding gap in the Michigan Public School Employees Retirement System.

Small consolation for an earnings disappointment.

On the Down Low at the Roadshow

An analyst had a quick word
With investors his bankers preferred:
"We've cut our projections
For those with connections,
But won't tell the rest of the herd."

The fallout from the Facebook IPO continues. On Tuesday a spotlight was shown on the practice of IPO underwriters' not disclosing their analysts' estimates of companies' earnings, except to a small group of large institutional clients. Already a troubling practice, these quiet revelations appeared to skirt the letter of the law in the Facebook case. Analysts for Morgan Stanley and the other underwriters all made substantial cuts in their Facebook earnings forecasts during the pre-IPO roadshow, evidently based on information quietly provided by the still-private company. Joining Goldman Sachs in contempt for the retail "muppets" clamoring for $FB shares, the Morgans - J.P. and Stanley - have still not disclosed their estimates, as indeed they may not until 40 days after the IPO date. Reuters finance blogger Felix Salmon gives a full explanation of the issues and facts of the case, in a post that is worth the time of those who would like to gain insight into the world of stock underwriting.