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Google shares slide amid Schmidt speculation
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Google shares slide amid Schmidt speculation
Ian Sherr
SAN FRANCISCO
Fri Apr 16, 2010 6:44pm EDT
A Google Inc page is shown on a blackberry phone in Encinitas, California April 13, 2010.
Credit: Reuters/Mike Blake
SAN FRANCISCO (Reuters) - Google Inc shares fell more than 7 percent on Friday after its quarterly results came in short of expectations, leading some analysts to cut price targets on concerns about growth.
Technology | Hot Stocks | Media
Some investors also disliked Google's decision that Chief Executive Eric Schmidt would no longer participate in earnings conference calls, even though a number of prominent chief executives, including Apple Inc's, IBM Corp's and Microsoft Corp's_, are often absent from such calls.
A number of brokerages raised their price targets on Friday for Google's shares, citing favorable prospects for Google's core search business. But Barclays Capital analyst Douglas Anmuth decreased his, citing a lack of growth momentum beyond search and advertising.
"A significant revenue driver beyond core search has not materialized and it's becoming tougher for the company to beat numbers," Anmuth wrote in a research note.
Reducing his forecast to $650 from $675, Anmuth added that sequential revenue growth and margins were lighter than expected. But he kept his "overweight" rating.
Other analysts were less downbeat. In-Stat analyst Jim McGregor said Google could continue to lean heavily on its core search business because it still holds potential for growth.
"The advertising model for TV, print and stuff like that is tanking," he said. "I don't think there is any limit to the growth in terms of online advertising because everything is going online."
Still, in the longer-term, concerns were increasing over whether Google can keep growing at a red-hot pace amid mounting regulatory and legal challenges and a partial withdrawal from China in a row over censorship.
The world's No. 1 search engine is facing an increasing threat from Apple in the nascent mobile advertising business and questions about whether it can diversify successfully away from search, despite a series of initiatives.
MARGIN PRESSURE
On Thursday, Google posted a 23 percent increase in revenue as Internet advertising rebounded. But investors had grown accustomed to seeing blowout results, and investors took profit.
At least four brokerages, including BofA Merrill Lynch, raised their price targets on Google on Friday.
BofA Merrill Lynch analyst Justin Post expects share price gains to be driven by the emerging display network business, YouTube monetization.
"Google should begin to generate significant revenues from alternative sources beyond search this year, with display advertising and YouTube monetization the biggest near-term opportunities," Post said. He raised his price target on Google to $685 from $670 and maintained a "buy" rating.
But other analysts highlighted short-term concerns over rising costs at Google, which said it would begin hiring aggressively and investing to sustain its pace of growth.
Kaufman Bros analyst Aaron Kessler said he expected costs to be more front-end-loaded this year, and that overall expense growth would moderate. Still, he cut his price target on the stock to $725 from $740, and lowered his 2010 and 2011 profit estimates. He maintained a "buy" rating on the stock.
Analysts also highlighted concerns about Thursday's announcement that Schmidt will no longer address investors on quarterly earnings conference calls. In a research note, Stifel Nicolaus's George Askew called Schmidt's absence "troubling."
"The investors think it's significant, it generates another layer of speculation, puts another log on the fire for the bear case," said BGC Financial analyst Colin Gillis. "People are concerned there's something wrong."
Chief Financial Officer Patrick Pichette, denying any internal rift, urged investors not to read beyond the fact the company was trying to "streamline" the process.
Google shares closed $45.15 lower at $550.14 on Friday.
(Reporting by Ian Sherr and Gabriel Madway in San Francisco and Manasi Phadke in Bangalore; editing by Mike Miller and Andre Grenon)
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See All Comments (9) | Post Comment
Apr 16, 2010 2:18pm EDT
What does the “Schmidt Speculation” (Title) relate to?
astra4
Report As Abusive
Apr 16, 2010 2:47pm EDT
The only thing more surreal than a bunch of wee-men who produce absolutely nothing of value for a living carping about a company that’s making a ton of money the hard way for not doing enough is that so-called smart investors would actually listen to them.
HBC
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Apr 16, 2010 4:41pm EDT
If the reason he did not show up is really a heated ping pong game, I want to SHOVE MY FOOT UP HIS ASS!
GeneralTso
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Apr 16, 2010 5:34pm EDT
Did you not see Maria Bartilomo on the financial news network yesterday MIS-REPORTED Googles’ earnings as the whisper numbers, a mere $6.06!? She reported it twice and was corrected and acknowledged her error!! to the great number of $6.76. By then, the damage was done, and the stock dropped by over 5% right away, and I have seen nothing on the news about this. Plus immediately,Eric Schmidt announced he no longer would be announcing the numbers except on the website. DUH! Wouldn’t you? I have heard nothing about this all day but saw it for myself and thousand of others did, and I believe it caused this runaway train and all this speculation. I couldn’t help but notice Maria was not on The Closing Bell and had a replacement.But the “liberal Media” sure protected her, it seems.
b1955s
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Apr 16, 2010 6:05pm EDT
I have reported my story about Maria Bartilomo and her mis-reporting to so many sources, I can”t believe it will go un-noticed!
b1955s
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Apr 16, 2010 6:16pm EDT
I hope his meets your standards as I am not the only one who saw Maria Bartelono mis-report Googles numbers, and no wonder Eric Schmidt immediately announced he would only be reporting on the website from now on. Is it any wonder!! I guess the media is protected but she caused this runaway train.
b1955s
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Apr 16, 2010 9:18pm EDT
I wonder why the article did not mention anything about the fact that facebook passed up Google in not only amount of time spent on a website, but visitors.
graggadv
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Apr 16, 2010 11:04pm EDT
Schmidt is insipid. Perhaps it is a trend of sorts – or at least one can hope – that is that people generally are becoming aware that a company who claims not to do harm whose CEO essentially proclaims that people shouldn’t expect privacy is showing some cracks. After all, so says he, essentially, if you have nothing to hide what are you afraid of? Google is a predator much like the government within which it resides and owes much to, truth be told.
RoninMaximus
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Apr 17, 2010 2:38am EDT
Schmidts arm of the NSA, Google, is a propaganda TOOL for the marxist Obama.
Google is being revealed to be a freedom-hating spy agency with orwellian “papers” on everybody.
Eric “Obrien” Schmidt.
mickrussom
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