Giving guidance as a public company is one of those things that you have to practise. There is a knack to being empirical and elliptical at the same time; it’s not something you just do, like taking a turn at bat at a company summer party.
Google learned that tonight. After saying over and over that it doesn’t give financial guidance, the search company turned around tonight and on the conference call it gave financial guidance, right in the same breath as it said it doesn’t give guidance:
Eric Schmidt, Google – CEO
I do want to remind everyone, and I think everyone on the call knows this, that we don’t give guidance. I would like to emphasize that Q2 and Q3, particularly Q3, the one that we’re now in, that we will be announcing in October, is historically a slower quarter for sequential growth for both Internet traffic and for advertising expenditures as to the summer patterns and international behavior and that kind of thing. Last year’s quarter was particularly strong in Q3 because of improvements in our ability to monetize traffic and perhaps because of the publicity surrounding our IPO approximately a year ago.
Did you catch that? Schmidt said that Google doesn’t give guidance, and then in the very next sentence he explained that Google, a momentum/growth company, is seasonal and next quarter looks dodgy. That is unnerving to investors, sort of like telling them that the company actually gets a significant percentage of its profits from cyclical rare earths.
The unsurprising upshot? Google’s shares plunged in after-hours trading, falling more than $19, which takes the company back below the $300 mark. That’ll teach those Google guys, won’t it. Don’t give guidance when you say you’re not going to give guidance. There is nothing investors hate more than being jolted out of their blissful ignorance.