--Google says net income shrank 20% in latest quarter
--Google shares closed 8% lower after premature release of
earning report
--Financial printer R.R. Donnelley says company is probing the
incident
(Adds CEO, CFO comments from conference call.)
By John Letzing and Ben Fox Rubin
Google Inc. (GOOG) is finding it tough to juggle a massive
acquisition and tumbling prices for ads in its dominant search
engine.
The Mountain View, Calif., company is also apparently finding it
difficult to properly time the release of its quarterly earnings
reports.
Google inadvertently blindsided investors Thursday by releasing
a downbeat third-quarter report in the middle of the day--hours
earlier than anticipated, and before the market had safely
closed.
The result: Google shares tumbled, eventually closing at $695,
down 8%.
Google said its financial printer, R.R. Donnelley & Sons Co.
(RRD), filed the quarterly results without authorization. R.R.
Donnelley said in turn that it is "fully engaged in an
investigation to determine how this event took place."
During a conference call held later with analysts, Google Chief
Executive Larry Page apologized "for the scramble earlier
today."
The CEO, whose voice sounded feeble and hoarse following an
extended absence from public appearances for an undisclosed health
issue, said he's "really happy with our business."
In its report, Google said net income shrank 20% in the quarter.
The results were weighed down by the recent acquisition of Motorola
Mobility, which posted an operating loss of $527 million for the
period.
Thanks in part to the acquisition, Google's headcount ballooned
to more than 53,500, with about 17,500 of those working for
Motorola.
Google closed its $12.5 billion purchase of the cellphone maker
in May, in a bid to expand its influence over the hardware
market.
Another move into hardware also hampered Google's profitability
in the quarter: The introduction of its Nexus 7 tablet in June.
While use of Google's search engine continues to grow, the
prices it commands for search advertisements is declining.
Google said its rate of paid clicks, or the number of times
users clicked on search ads, rose 33% compared with the period last
year. But the prices paid for those clicks declined 15%.
Google generally pulls in less revenue from advertising placed
on mobile devices than those on desktop computers. As more people
use Google on phones, that has created a downward trend for overall
ad prices.
During the conference call, Google executives stressed that
factors other than mobile use played into the drop in prices, such
as foreign currency fluctuation.
Mr. Page said "monetization" of Google's search service on
mobile devices is now "a significant fraction" of what it is on
desktops. He added, "I don't think the things we need to do are
that huge."
Mr. Page downplayed the importance of the ad pricing decline,
and trumpeted some upbeat news about Google's mobile efforts. He
said the company is now making more than $8 billion in annual
revenue on mobile devices from ads, apps and content like books or
videos.
One year ago, Google disclosed it was pulling in mobile ad
revenue at a rate of about $2.5 billion annually.
Overall, Google said Thursday its third-quarter profit was $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 a share. Net revenue came in at $11.33 billion.
Analysts surveyed by Thomson Reuters had expected earnings of
$10.65 a share and net revenue of $11.86 billion.
Operating expenses jumped to $4.8 billion, Google said, from
$3.3 billion in the year-ago period.
Motorola contributed $2.58 billion in revenue in the latest
period.
Write to John Letzing at john.letzing@dowjones.com and Ben Fox
Rubin at ben.rubin@dowjones.com