Google hammered by triple whammy of rising costs, falling prices and big losses at Motorola

Google’s shares were suspended on the New York Nasdaq exchange when the company’s third quarter figures were released early, due to a printing cock-up apparently. The share price had fallen by nearly ten per cent per cent as the Q3 numbers showed a 20 per cent fall on last year’s equivalent period, coming out a still substantial $2.18bn.

But this is way below analysts’ expectations and inevitably invites the question: why didn’t self-appointed CEO Larry Page (pictured), one of the two founders of the company, say something about it first? That’s what public companies are supposed to do.

Page turfed out former CEO Eric Schmidt, now president or something, last year on the grounds that he was too boring. But, if you’re a huge public company , boring can be good sometimes.

Printing errors aside, even Google’s spin doctors (all 19,753 of them or whatever the total is) would be hard-pressed to paint after-hours lipstick on this particular pig.

At first glance this sudden dive in profits looks bizarre, Google’s Android system is taking over the mobiles world and its core search business is raking in ever-larger profits. But the company is also hiring people at a great rate and seems to have bought a monumental bummer in Motorola for which it forked out $12.5bn earlier this year. It doesn’t even seem to trust Motorola to make its new phone kit. Must be the patents..

Google remains the biggest force in communications, including advertising. It still rakes in huge amounts of dosh, more than $11bn in the problematical third quarter.

But being a public company is a bit different to surfing the bottomless pits of West Coast private equity companies. The hardest thing of all for a company boss is to amend a company’s culture to keep insiders and outsiders happy.

Update 19/10/12

Google was hammered by three factors: a huge rise in expenses from $1.17bn to $3.78bn compared to a year ago, $151m losses at Motorola compared to estimates of $28m and a bigger than expected fall in cost-per-click prices, down 15 per cent against estimates of 11 per cent.

The latter is the biggest worry for Google and its competitors which in the ad sphere include the big marcoms companies. At the moment online ad prices are involved in a race to the bottom and no-one yet knows where it will end.

The one bit of good news is that Google took $8bn in mobile ads, up from $2.5bn a year ago. But the rise in mobile advertising is clearly hitting advertising on traditional websites. Which will alarm the likes of Facebook too.

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About Stephen Foster

Stephen is a former editor of Marketing Week and London Evening Standard advertising columnist. He wrote City Republic for Brand Republic and is a partner in communications consultancy The Editorial Partnership.

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