GOOG Miss: The Day After

Analyst comments on the GOOG earnings miss last night are fairly dismissive of it as not being a thesis-changer. Instead, people are calling it “Google Being Google” (RBC), and just plain “sloppy” (Citi).

Overall, while you can whack the company for doing a crummy job of keeping investors informed about some material accounting changes, none of this miss seems due do deterioration in business conditions. I remain on the side of the bulls on this one.

Here’s Jordan Rohan at RBC saying the same thing more diplomatically:

Google apparently now accrues its bonus payments evenly throughout the year, instead of allowing the percentage accrual to ramp towards 4Q. That change was enough to shift an incremental $60mm to 2Q07 costs, mostly in the R&D and sales and marketing lines. Unfortunately, the management team did not endeavor to inform investors of this change until the 2Q07 report.


  1. So it’s only the best buying opportunity since March, I loaded up at today’s open. I suppose it would be impolite to mention a YHOO comparison. :)

  2. Jeffrey says:

    You don’t think an executive team that spends in an undisciplined fashion is a “deterioration in business conditions”?
    If so, then I want you to invest in my startup, because I really need to hire a few full-time masseuses. Not masseurs, mind you — masseuses.

  3. I don’t know Paul, it seems too convenient to chalk it up to Google being Google (GBG). I think that’s what THEY want you to think.
    I’d ascribe it to a more pre-meditated decision process. They had to know that the quality score improvements would hit AdSense and AdWords to some extent, but maybe they wanted to take the hit and obfuscate it…
    If that’s true, it doesn’t bode well for Yahoo or MSN which have MUCH worse arbitrage and ad quality liabilities…
    That’s my theory, anyways…

  4. $60m divided by shares equals about 19 cents.
    It appears that analysts did *not* adjust their numbers (since Google sprung this on everyone).
    So, does that take a 3 cent miss to a 16 cent beat?

  5. thanks