Google shares drop by 9% after premature Q3 earnings release

Google shares suffered a 9 per cent drop, about $68.19, to $687.30, after the company's publisher mistakenly released the third quarter financial Form 8-k report to the Securities and Exchange Commission while the market was still open.

On October 18, Google announced its third-quarter profit total was $2.18 billion, lower than $2.73 billion last year. The company's financial publisher R. R. Donnelley & Sons, accidentally released the Q3 Form 8-k report to the Securities and Exchange Commission's Web site earlier than scheduled, allowing financial data, showing that profits were down by 20 percent, to be available for at least four hours before the stock market closed. According to The New York Times, Google was scheduled to release its Q3 earnings only after trading closed, but the company's printer filed the report with the SEC hours ahead of planned schedule. The information release sparked off dumping of Google shares, and stock price taking an immediate fall of about 9 percent, or $68.19, hours before Nasdaq stopped trading in the shares. According to the Daily Mail: "...because they were released early, investors were able to dump their stock and send the shares into a nosedive. Adding to the chaos, a major trading website appeared to have crashed as investors sought to make sense of the situation." The Daily Mail reports Google was loosing more than $45 million for every second before the shutdown that Google requested. Google CEO Larry Page, blamed the early release at 12:30 p.m. Easter time on the company's financial printer, saying: "I'm sorry for the scramble early today. Our printers have said that they sent out the release just a bit early." The New York Times reports Donnelley, one of world's large commercial printers, said it was investigating the error. The Daily Mail notes that oddly, the premature release had a prefixed note "PENDING LARRY QUOTE," implying that the Google chief executive had not yet approved its release. According to the Daily Mail, "Pending Larry Quote" hashtag spread on Twitter with jokes such as #google and #oops. Google's Q3 revenue for the accounting period ending Sept. 30, 2012, was $11.33 billion, much lower than expected based on a survey of financial analysts who had projected a revenue of $11.87 billion. Google listed its revenue for the Q3, before deduction of traffic acquisition costs of $2.77 billion, at $14.1 billion. Q3 revenue in the same accounting period 2011 was $9.72 billion. According to Eweek, the report was the second release of quarterly results by Google since it acquired Motorola Mobility unit in May for $12.5 billion, but the first full quarter for the reporting of Motorola's revenues since the May acquisition in the middle of the second quarter. For comparison, the company's Q2 earnings report released in July, listed a revenue of $12.2 billion, about 35 percent year-over-year increase from 2011, Eweek reports. Page said: "We had a strong quarter. Revenue was up 45 percent year-on-year, and we cleared our first $14 billion revenue quarter. Not bad for a teenager." Google's operating income for the quarter was $2.74 billion on a GAAP basis. In 2011, the operating income for the same quarter was $3.06 billion. The revenue from Google's Motorola unit was $2.58 billion, $1.78 billion from the mobile segment and $797 million from the home product's segment. The Motorola unit suffered an operating loss on a GAAP basis of $527 million, a break down shows a loss of $505 million for the mobile segment and $22 million for the home products segment. The New York Times points out that Motorola's operating losses were due partly to the fact that although smartphones and tablet are attracting new users, the company is earning less on mobile ads than on desktop ads. Advertisers pay less per click on an ad. The cost per click also plunged 15 percent compared to the same period in 2011. Analysts note, however, that the challenges in the mobile segment are not unique to Google. Facebook, Apple and Microsoft are facing similar challenges. Analysts also observe that mobile is affecting Web business the same way that Web affected traditional business models for print publications in the past decade. According to The New York Times, Colin Gillis, analyst at BGC Partners, said: “All of these mobile devices are generating clicks that are just less valuable to advertisers. The supply part is doing so well, but the supply’s going to continue and continue to grow and they could devalue their inventory.” Eweek reports that a financial analyst Yousef Squali, of Cantor Fitzgerald, said Google's inability to meet analyst's expectations for the quarter "is largely attributable to [foreign exchange currency issues] and Motorola in relatively equal measures... The bottom line was 15 percent below consensus due to a combination of lower revenue as well as higher operating costs across almost all lines (costs, R&D and sales & marketing)." Financial analysts had anticipated Google's mixed results in the third-quareter, Eweek reports. In an earlier report, Reuters, for instance, had raised doubts that Google's shares prices could continue rising indefinitely. Google's Q3 results have also been significantly impacted by competitors such as MicroSoft and Apple. Google is also facing challenges related to regulatory issues in Europe and the US especially over to its user privacy and antitrust policies.