San Francisco – Google Inc. shares sank Wednesday after the company’s earnings report disappointed Wall Street and stunned almost everyone who follows its stock.
Co-founders Larry Page and Sergey Brin have always insisted they will run their 7-year-old company the way they want, even if it means ignoring stock- market pressures to hit a widely watched earnings target.
Tuesday’s release of a fourth- quarter earnings report that badly missed analysts’ estimates will test their defiant attitude, along with investors’ affection for the online search-engine leader.
“This shows that Google is not impervious,” Standard & Poor’s analyst Scott Kessler said Tuesday.
That realization rattled previously bullish investors as Google’s stock price plunged $30.88, or 7.1 percent, to close at $401.78 in trading on the Nasdaq Stock Market. The downturn wiped out more than $9 billion in shareholder wealth and trimmed about $2 billion combined from the net worth of Page and Brin, who are both 32.
The Mountain View, Calif.- based company, which went public in August 2004, said its net income nearly doubled from the previous year to $372.2 million in the final three months of 2005.
For most companies, that kind of stellar growth is a reason to celebrate. But investors have become accustomed to much more from Google, which had topped analyst estimates by at least 14 cents per share in each of its previous five quarters as a public company.
That streak of prosperity had helped to more than quadruple Google’s market value in less than 18 months.
This time around, Google fell woefully short of living up to the analysts’ estimates.
If not for a charitable donation and stock-compensation expenses, Google said it would have earned $1.54 per share.
That fell well below the average estimate of $1.76 per share among analysts surveyed by Thomson Financial. Google released its results after the stock market closed Tuesday.
Google’s revenue for the period totaled $1.92 billion, an 86 percent increase from $1.03 billion in the prior year.
