Google Inc.'s (GOOG) third-quarter income shrank 20% as total
costs jumped and advertising prices continued to slide.
Shares dropped 9.8% to $678.58 as results missed expectations
and the company released its results several hours earlier than
expected. The stock is up 18% over the past three months.
Despite consistent double-digit revenue growth for more than two
years, Google's shares had been moving sideways for much of 2012.
That changed in July, as concerns faded about its Motorola
acquisition and the price of mobile-search ads, leading the stock
to hit new all-time highs and post its biggest quarterly rally in
nearly seven years.
The company, which dominates the search-engine market, closed
its $12.5 billion purchase for cellphone maker Motorola Mobility
Holdings Inc. in May, as it looks to expand as a hardware provider.
It also recently pushed into the increasingly competitive tablet
market with its Nexus 7. The Motorola unit posted an operating loss
in the second quarter and was viewed as a potential drag on
results.
But, Google in August said it will reduce Motorola Mobility's
workforce by about 20% to help streamline the unit. Additionally,
investors saw hope that online advertising prices could stabilize
after Google in its second quarter reported a 1% sequential rise in
prices.
For the third quarter, the average cost that advertisers paid
Google per click fell 15% from a year earlier, and fell 3% from the
prior quarter. Also, paid clicks, a measure of how frequently
consumers click on Google's advertisements, increased 33% from a
year earlier and were up 6% from the second quarter.
Google generally pulls in less revenue from the advertising it
places on mobile devices than it does from traditional personal
computers. That's helped create a downward trend for advertiser
prices on Google, which has caused some concern.
The Motorola unit brought in $2.58 billion in revenue, with
$1.78 billion from the mobile segment and $797 million from the
home segment. Its operating loss was $527 million.
Google posted a third-quarter profit of $2.18 billion, or $6.53
a share, down from $2.73 billion, or $8.33 a share, a year earlier.
Excluding stock-based compensation and other items, profit fell to
$9.03 from $9.72 a share. Revenue, excluding traffic acquisition
costs, improved to $11.33 billion.
Analysts surveyed by Thomson Reuters expected earnings of $10.65
a share and net revenue of $11.86 billion.
Total costs jumped 71%.
Write to Ben Fox Rubin at ben.rubin@dowjones.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires