Typically tight-lipped Google saw its stock price dip after the online search giant revealed that it had told investors too much about ad revenue projections the week before
Google has advised investors to disregard an internal financial forecast mistakenly posted on its Web site — a mix up that included a reference to management’s concerns about the online search engine leader’s profits narrowing amid tougher competition.
The material, including a projection that Google’s revenue will rise by about 55 percent this year to US$9.5 billion, surfaced on the internet briefly last week when the company welcomed stock market analysts for a management presentation at its Mountain View, California, headquarters, according to a Securities and Exchange Commission filing.
The stock market reacted to the revelation by knocking more than two per cent from Google’s per-share price in after-hours trading. Google’s stock dropped to $US356.40 dollars.
The 2006 advertising revenue projection and AdSense margins were mistakenly left on a slide show presented to analysts, according to chief executive Eric Schmidt. The slide show was originally prepared late last year for an internal strategy meeting at Google, Schmidt said in a commission filing.
The Mountain View, California-based internet search portal did not back off its estimated ad growth estimate, however. "To really get down to brass tacks, were going to execute well on our core ads projects to help us exceed the $US9.5 billion target (and backfill any AdSense partner loss)," the company said.
Even if the material did not reflect Google’s official predictions, the leaked information could renew investor concerns about the company’s ability to live up to the lofty earnings expectations that have helped its stock price more than quadruple since an August 2004 initial public offering at US$85 (AU$116) per share.
The stock market had already closed by the time of Google’s SEC filing. The company’s shares declined US$3.65 to finish at US$364.45 on the Nasdaq Stock Market, and then dropped by another US$8.33, or 2.3 per cent, in after-hours trading.
Besides forecasting its revenue, Google indicated its robust profit margins might weaken this year as more its rivals try to lure away some of its advertising partners. The inadvertently leaked material didn’t include any specific earnings forecasts.
Mr Schmidt said that company expectations could be undone by market competition, economic conditions, barriers to foreign markets and even geopolitical woes such as wars.
The concerns were amplified last week when the company’s chief financial officer told an investor conference that Google will be hard-pressed to improve upon the advertising formula that has been driving its rapid revenue growth.
Investors began to fret about Google’s growth prospects in January after the company’s disclosed its fourth-quarter earnings had fallen far below analyst estimates.
Google’s annual revenue has soared from US$440 million in 2002 to US$6.1 billion last year.