Google stock falls amid botched report WALL STREET

FILE - In this Monday, Sept 17, 2012, file photo an unidentified man's shadow reflects on a commercial bus with an advertisement for Google Mail, in Lagos, Nigeria. Google Inc.'s stock plunged suddenly on Thursday Oct. 18, 2012, after a contractor prematurely released the search company's third-quarter earnings report. (AP Photo/Sunday Alamba) less FILE - In this Monday, Sept 17, 2012, file photo an unidentified man's shadow reflects on a commercial bus with an advertisement for Google Mail, in Lagos, Nigeria. Google Inc.'s stock plunged suddenly on ... more Photo: Sunday Alamba, Associated Press Photo: Sunday Alamba, Associated Press Image 1 of / 1 Caption Close Google stock falls amid botched report 1 / 1 Back to Gallery

A botched earnings release and profits well below Wall Street expectations caused a sharp drop in Google's stock Thursday, forcing trading to be halted for several hours on the Nasdaq as company officials scrambled to ease investor concerns.

The search giant reported a drop in third-quarter net income of $9.03 per share, well below analyst expectations despite $14.1 billion in revenue for the quarter, an increase of 45 percent. The revenue Google derives from clicks on its search results - the heart of its business - was down 15 percent over 2011.

Many attributed the sharp decrease in per-click revenue to the rise of search on mobile devices, which commands less revenue than searches on desktop computers. Advertisers pay less for searches on mobile devices because users are less likely to make a purchase on the go.

The earnings report alone was enough to send alarm through Wall Street and caused the stock to plunge almost 9 percent in a matter of minutes before being halted at $689 per share. It later closed at $695.

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Early-release turmoil

Adding to the day's turmoil, Google's printer accidentally sent out the earnings report early. The SEC filings appeared on the Web a few hours ahead of schedule and included editorial comments like "LARRY QUOTE HERE," ostensibly implying the space for a quote from Google CEO Larry Page.

In a conference call later in the day, Page downplayed the early-release turmoil and the decrease in click revenue, pointing out that Google's total user engagement with search is up. "This will open a huge new universe for our advertisers," Page said on the earnings call.

While the stock reacted sharply, analysts were less worried. "I don't take as much stock in Google missing expectations as I do with other companies because Google doesn't provide guidance going forward," said Giri Cherukuri, head trader at Oakbrook Investments. "It wasn't good (Google) missed, but there wasn't a lot of information to form what (their financials) would have been."

That doesn't mean Google's clout is unassailable. The search giant has recently navigated a growing smartphone and tablet market with the rest of the tech community.

Results Thursday "show how critical the move into mobile is for Google," said Carolina Milanesi, an analyst at research outfit Gartner. "Consumers are not only moving their time away from their PCs to phones and tablets but also from across the Internet to dedicated apps, which are minimizing the role search has in everybody's day."

Milanesi said Motorola Mobility - which Google purchased this year - shouldered some of the blame, arguing that its weak performance brought down Google's overall value.

Introducing hardware

Getting into the hardware business has been historically tough for software companies. Microsoft released numerous devices before it finally hit pay dirt with the Xbox.

Google made the jump out of search and online software with its Nexus smartphone and has since released a Nexus tablet.

Google also introduced a new Chromebook - its web-only laptop - on Thursday, but the news was overshadowed by the earnings fiasco.

The purchase of Motorola was largely seen as a move to acquire the company's portfolio of patents for mobile devices. As the competition for mobile technologies has heated up, large tech companies such as Apple, Samsung and Oracle have brought litigation alleging patent infringement against one another.

But the search giant is still one of the most influential firms in technology. "Our perspective is that Google is in a fundamentally good position," says Clark Fredricksen, vice president at Web analysis group eMarketer. "The company now holds more revenue than any other company in the U.S. search, display and mobile advertising markets, respectively."

Antitrust suit expected

The botched earnings release and stock volatility comes on the heels of antitrust and customer data issues at home and abroad for the search giant.

Though the Federal Trade Commission has yet to say so publicly, Reuters cites unnamed sources that say the regulatory body will soon bring an antitrust suit against Google, after a 19-month investigation into whether the company tampers with search results to box out competitors' websites.

Reviews websites accuse Google of manipulating search results by placing their websites beneath Google's properties on the list of search results.