Google Earnings Come Early; Shares Drop

http://blogs.wsj.com/marketbeat/2012/10/18/google-earnings-come-early-shares-drop/

by Kopion • 14 years ago

131 133 14 years ago

blogs.wsj.com

uptown• 14 years ago

Speculation is that their filing agent may have accidentally released them early.

update: confirmed by R.R. Donnelley & Sons

wtvanhest• 14 years ago

Where is that source?

waterlesscloud2• 14 years ago

There's a quote from Google confirming in this TC post: http://techcrunch.com/2012/10/18/googles-stock-takes-a-dive-...

Also, trading was halted at Google's request while they complete the document.

hkmurakami• 14 years ago

> Its incompleteness was evidenced by the inclusion of the phrase, “PENDING LARRY QUOTE,” just above a summary of results.

source: http://www.bloomberg.com/news/2012-10-18/google-blames-r-r-d...

trequartista• 14 years ago

Pending Larry has already arrived on Twitter - twitter.com/PendingLarry

arscan2• 14 years ago

Looks like it took investors about 30 minutes to figure out who made the mistake:

https://www.google.com/finance?q=NASDAQ%3AGOOG+NASDAQ%3ARRD

jpdoctor• 14 years ago

confirmed by R.R. Donnelley & Sons

I wonder how much the bribe was? I'm sure much less than the profit on puts/calls.

jamesmcn3• 14 years ago

Google is advertising company which enjoys masquerading as a computer science R&D lab. They build self-driving cars. They launched a satellite.

I suspect that they will start making their own SEC filings soon.

Wohlf• 14 years ago

I think when you accomplish some of the things Google does, it becomes less of a "advertising company which enjoys masquerading as a computer science R&D lab" and more of "an advertising company that owns and funds a computer science and engineering R&D lab".

hodder• 14 years ago

Well that was an easy short. RRD dropped long after your update. Nice work Uptown!

_pferreir_• 14 years ago

Panic anyone?

If it has indeed been an accidental release, someone is going to pay very dearly for it.

bluekeybox• 14 years ago

Just read some article which talks about the "fear" that consumers may be getting smarter and increasingly relying on direct searches and mobile apps (aka Amazon website, Amazon mobile app) instead of going through Google. If that is correct, then it sounds like a shift in the market rather than shrinking. Admittedly though it sounds more like a rationalization of reduced earnings with no direct proof.

diego4• 14 years ago

As an interesting aside, I created a word cloud with the last 1000 Hacker News headlines to cross the 250-point threshold. I found Google was in 49 of those. Hacker News seems to care more about Google than any other company.

http://images.diegobasch.com/newsyc250.png

cft• 14 years ago

Interesting: I could not spot Facebook there easily?

jamesaguilar4• 14 years ago

I found Zuck, but no Facebook.

ihsw• 14 years ago

You say that like it's a bad thing.

mbesto• 14 years ago

Curious - are you using NetBase for this?

diego4• 14 years ago

No, it's my own tool written in Clojure, using WordCram.

http://wordcram.org

arscan2• 14 years ago

Very cool. I'm not sure that google would be thrilled about the words that ended up inside of their letters though... its like a subliminal message.

mtgx• 14 years ago

Google is kind of the Internet company, and HN runs on the Internet, so...

jusben13694• 14 years ago

I don't trust this as I don't see "Stripe" in a very large font! (sort of only half joking)

dredmorbius2• 14 years ago

No Microsoft. No Facebook. No IBM.

Very few from this list: http://en.wikipedia.org/wiki/List_of_the_largest_technology_...

Do you have the raw ranking data available?

cooldeal3• 14 years ago

Posts that aren't negative about Microsoft are routinely flagged off the front page.

bduerst3• 14 years ago

Did you use a published data set or did you scrape the site?

diego4• 14 years ago

I used the newsyc250 feed on Twitter, last 1000 tweets.

ok_craig• 14 years ago

I don't really think that's true at all. Google just generates the most newsworthy headlines.

The same trend can be found on many other sites. I think TechCrunch once posted an analysis of their headlines that showed something like a 3:1 ratio of Google headlines to Apple headlines, and (at least at the time, haven't read them recently) they clearly weren't bigger fans of Google than Apple.

duaneb2• 14 years ago

I think that Google is immensely influential in the current startup community, for being the best example (in the current market) of a successful, profitable startup. Furthermore, I think their corporate environment is often held as, if not a model of, then at least better than 99% of corporate environments. I'm sure some people (Michael Church is popular on HN, I think) would disagree. But the point is, everyone wants to be the next Google.

So, color me not surprised.

dholowiski• 14 years ago

Trading has been halted as well.

baltcode• 14 years ago

Why do they do this? Isn't the whole point of the free market that the prices stabilize quickly without interventions?

waterlesscloud2• 14 years ago

Google requested to halt so they could finish the report. The early released version is not 100% finished.

jonknee• 14 years ago

Because the market is "stabilizing" on possibly inaccurate information that was not meant for release. It goes into securities fraud pretty quickly if you knowingly put out incorrect financials and allow trading.

shiftpgdn• 14 years ago

Because the price fell dramatically from a release of information that wasn't from Google. Until its confirmed by Google it's just speculative which NASDAQ doesn't want.

Source: http://www.nasdaqtrader.com/Trader.aspx?id=TradeHaltCodes

smackfu3• 14 years ago

Normally earnings are released when the markets are closed, so this doesn't seem so unusual.

guyzero• 14 years ago

Yeah, everyone loved the free market back in 1929.

forgotusername• 14 years ago

Free markets are not immune to panic.. a few hours break in trading that affects everyone is fair, and allows participants time to analyse whatever news release occurred, rather than knee-jerk liquidization of their positions, which they may come to regret after cooling off.

This one was automated AFAIK, since GOOG dropped so hard. See http://en.wikipedia.org/wiki/Trading_curb

gfodor6• 14 years ago

kind of stoked about this, been waiting for an opportunity to go long GOOG due to their autonomous car moat they're carving.

pclark2• 14 years ago

their autonomous car project is folly

InclinedPlane• 14 years ago

Prove it.

mrtron• 14 years ago

why do you think so?

waqf• 14 years ago

Is it really such a moat? Probably other people are trying to build autonomous cars but have the sense not to talk about it.

gfodor6• 14 years ago

The moat comes from the fact that I'm pretty sure Google's success with autonomous cars comes from their integration of AI and their maps infrastructure. The cars drive well because they have the data from cars that have previously driven the same route. This synergy between big data, infrastructure, algorithms, and hardware is extremely hard to replicate and is exactly the sweet spot at which Google is the best in the world.

Basically, I think the reason you hear about Google's cars and not other peoples' cars is because Google's happen to actually work. The constant thesis of Google itself has been that dumb algorithms and lots of data works better than smart algorithms. They've cracked many, many long-unsolved problems by tilting their thinking in this direction (examples: search, NLP, voice recognition, translation.) Autonomous car navigation is the next one, and in this case the data is extremely difficult to get. Who else has had cars driving around for the last 5 years collecting street-level data? Who else is even capable of building the systems to collect, process, and organize such data?

It's a long play though. I don't think you'll start to see GOOG react tangibly to the autonomous cars project for another 4-5 years or so. But my guess is that their success will be on-par with the iPhone in terms of generational leaps ahead and barriers to entry, if not more. If Google manages to get their technology into most major car manufaturers' vehicles there will be massive switching costs due to integration expense. As soon as one manufacturer has Google technology in their cars, provided consumer reaction is positive, they will all want it. Once they are in, they are in, and there will be recurring revenue via software updates and next-generation capabilities for newer vehicles. Hell, they could even have a service model, where manufacturers or consumers themselves pay a monthly fee for autodrive service.

Of course, their current valuation may or may not justify this, if you presume their EPS growth due to autonomous cars will be offset by low growth in their current cash cow, adwords. I honestly think this is a bigger risk than the risk that autonomous cars will not work out though. It's going to happen, and it appears they are very far ahead of everyone else.

revelation• 14 years ago

I love this talk of "analysts". Did the "analysts" miss that Google just bought a struggling 10B+ Motorola? Do they expect it to be some magic unicorn that can turn Motorolas losses into Googles profits in a single quarter?

smackfu3• 14 years ago

Here are the analyst numbers in a bit more detail: http://finance.yahoo.com/q/ae?s=GOOG+Analyst+Estimates

38 separate analysts, high estimate was $13, low estimate was $9.92. Average was $10.65, actual numbers were $9.03, so below even the most pessimistic analyst. That usually means the publicly available info just wasn't accurate, that something happened privately that only Google knew about.

Usually companies avoid this kind of thing by giving some mid-quarter update so that they can mitigate some of the damage.

Google actually provides no EPS guidance at all though, which also caused problems with a big miss in January 2012. Analysts like to have something to work off of.

rm9992• 14 years ago

Analyst earning forecasts are known to be optimistically biased. Here's a paper discussing this: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=971027

jusben13694• 14 years ago

Sometimes I sense a lot of derision from some folks towards "analysts" on these posts. A good analyst has a lot of public data and history to go along with their own sleuthing and detecting (talking to larger customers, suppliers, partners etc) where they should arrive at good estimates. Lord knows they get paid pretty well to be good at it. So if this was the cause of the big shortfall and all the analysts missed it then it is a poor job they're doing. I just don't think we should deride analysts and or let them off the hook based on the idea that there isn't a discipline here that can be followed.

qdog3• 14 years ago

Something like 9/10 funds under perform the market as a whole, right? Analysts are almost all liars marketing themselves, I don't think they need a 'break'.

There's a lot of derision because the profession of stock analyst is about equal to Snake Oil Salesman.

jmduke• 14 years ago

This meme of 'anyone who is not a programmer is an idiot' has to stop. This is incredibly frustrating and severely undermines the level of discourse.

EmergencyKnave• 14 years ago

That's not what he said.

jjtheblunt• 14 years ago

I believe the meme is

"What _is_ a Wall Street analyst, and why are such considered credible?".

jamesaguilar4• 14 years ago

He seems to be saying, "people with idiotic beliefs are idiots." Nowhere in there are programmers mentioned or is any comparison to them made.

jamesmcn3• 14 years ago

Nice try, analyst.

zmj• 14 years ago

Most people are bad at making predictions. This is particularly true when they have incentives other than accuracy.

Programmers are not immune to that failure mode, but programming culture encourages data-driven decision-making and prizes empirical results.

ecliptic• 14 years ago

What Google makes per ad click is down 15% year over year and 3% for the quarter. No unicorn needed.

incision• 14 years ago

Prediction is difficult, especially if it's about the future.

There will probably be at least a few analyses published in the next few days claiming this miss was "obvious" for various reason, all with the equal benefit of hindsight.

If you can consistently identify things which analysts and those who follow them are prone to overlook or fail to comprehend, there's all kinds of money to be made.

Personally, I've had some great successes putting money behind my own predictions.

prostoalex• 14 years ago

Some missed, and some didn't. Good thing you had the prescience to foresee this.

Care to disclose your position and total profit raked in on betting against those analysts? Stock market opinions are kinda cheap otherwise.

tatsuke952• 14 years ago

No, they account for such things, and did, and despite that, Google "missed" the estimated earnings.

There is no bigger industry on the planet than the financial industry. That means a ton of money flowing around. There is far more sophistication there than you give it credit for.

gfodor6• 14 years ago

Some poor bastard on another forum I read had short put options open and was literally in the middle of closing them (due to earnings release at end of market) with his mouse when the stock dropped.

jrockway2• 14 years ago

This doesn't sound that terrible. One enters into a short put position when he believes that XYZ company is worth buying at $X, but not at the current price. So you open the short put position at the $X strike price and either collect the premium if the stock doesn't go down, or be assigned the shares at the price you think they're worth if the stock does go down. Assuming you did your research right, both are good positions to be in.

And remember: if a particular option you're selling has a really high premium, it's because the market expects the position to be risky.

mynameishere• 14 years ago

Being forced to buy 700 dollar shares at 760 (or whatever) is not a good position to be in. Especially if you don't have the money, which happens often enough.

xhrpost• 14 years ago

I'm not a stock expert and we have limited information here but I think I understood the dilemma in a different way, perhaps someone can fill us in. I took OP's explanation that this man had actually shorted (sold options he didn't own) put options in the past. If their strike price happened to be very close to the Google share price early this morning, and they expire this Friday, then they would be relatively cheap to close (i.e. buying them back to close his position). However, the price drop would cause those same put's to jump in price by roughly the loss on a share. So what would cost him a few dollars or pennies per share to close, now costs $60 per share to close. Options are traded in 100 packs so I take it this put him back thousands.

gfodor6• 14 years ago

What you said has little to do with dollars and cents and more to do with perspective. People short puts for all kinds of reasons, only one of which is that they believe the stock is worth buying at that price. For example, someone might short a put if they have strong convictions the stock is going to have lower volatility than the implied vol of the price of the option, regardless of the intrinsic value of the stock. Or, as is likely in this case, that the market has priced in excessive volatility pre-earnings. From strictly a money point of view, this guy is sitting on a large unrealized loss simply because this thing unexpectedly got leaked. This event was obviously not priced into the option chain. His intention was to not be exposed to GOOG post-earnings and the black swan event of some idiot mis-releasing earnings caused him to get hammered.

Cieplak• 14 years ago

Definitely not the first time RR Donnelley has dropped the ball.

mtkd2• 14 years ago

There is a lot of good numbers in that release.

Motorola down to be expected.

PPC yields -15% is concerning but the soon to come monetization of Shopping is going to reverse that.

The p/e is 20 vs FB at 66.

Google are still the strongest and most consistently innovative large-cap around. They've already moved past the point that MS failed at.

Google ad systems are going to be able to subsidise hardware (TVs, phones, tablets, cars) in a way no other company can going forwards.

chadzawistowski• 14 years ago

They've already moved past the point that MS failed at.

Can you elaborate? Are you referring to the late 90s trials and their aftermath?

mtkd2• 14 years ago

Microsoft tried to compete in every technology market simultaneously - spreading the inhouse talent too thin becoming nothing to anyone.

The few really good products they had (SQL Server, OneNote etc.) got lost in the noise. Everything became unstable, clunky, complicated and inconsistent.

Most kids leaving school now think Xbox when they hear 'Microsoft' - not really the legacy Microsoft deserved.

(it could all have been solved by splitting the company up in to 4 - OS/tools, Gaming, Apps, Online Services and letting them compete in their own vertical spaces without having to do things the Microsoft way - SQL Server running on Linux, VS on OSX etc.)

Google haven't fallen in to that trap - they are not competing in every single market - when they do compete in a new market they don't dilute their existing product quality - and there is a cohesion to the product strategy.

tlogan3• 14 years ago

Can you please quantify the "most consistently innovative large-cap around" comment? What Google did lately which was innovative?

I'm not trying to be anti-Google, I'm just honestly asking. For example, can you compare innovations Google put forward in last couple of years and compare it with, lets say, MSFT?

zfran• 14 years ago

Android?

bvi• 14 years ago

Google Glasses and the self-driving cars come to mind.

tensor2• 14 years ago

Self driving cars. Glass. Google Now. Maps. Plus all the internal innovation such as new database technologies, custom routers, computer science research, and other technology.

There are few places that compare to Google.

minwcnt5• 14 years ago

In search alone, Google launches hundreds of improvements per year. Most people would call that innovation. The biggest recent example is the knowledge graph, and there was stuff like instant, but they're constantly doing algorithm changes behind the scenes that are not as visible.

They also do a lot of stuff for advertisers (their real customers) that you probably won't know about if you don't manage advertising campaigns.

Android has had lots of innovations, such as being the first NFC-enabled mobile OS, the first with turn by turn directions, voice actions and the quality of their speech recognition in general (which requires constant innovation), etc.

Google Translate.

Google Takeout.

Google Transparency Report.

The Google+ sharing model (circles), which forced Facebook to respond and implement something similar.

etc.

loceng• 14 years ago

The people that sold Google stock are probably the same ones who bought Facebook originally..

bduerst3• 14 years ago

Sounds about right - the stock market will always have irrational people :)

Google Earnings Come Early; Shares Drop

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