Google shares (GOOG) plunged today after the company's third-quarter earnings results were released ahead of schedule, erasing nearly $20 billion from the search giant's value.
Wall Street pummeled the company's shares based on earnings results filed with the Securities and Exchange Commission. According to the report, Google's profits came in at $9.03 per share, more than a $1.50 below analysts' estimates. Earnings fell by more than 20 percent compared to the same time last year to just under $2.2 billion.
NASDAQ halted trading on Google sharesin the middle of the trading day, stemming the bleeding for Google at least temporarily. The company's stock had fallen more than $68, or more than 9 percent, from its opening price to $687.30 at the time the exchange stopped Google's shares from changing hands. After trading resumed around 3:20 p.m. ET, shares inched up to close at $695.42, a loss of just under 8 percent.
The decline in profits stems in part, and most worryingly for Google, from a drop in the value of ads served on Google sites, as well as sites on Google's ad network. The company said its average "cost-per-click" had fallen by 15 percent compared to the third quarter of 2011 and by 3 percent compared to the second quarter of 2012. A half-billion dollars in losses at Google's Motorola Mobility division, where the company announced major job cuts earlier this year, also hurt the bottom line.
Revenues for the quarter, excluding payments to members of Google's ad network, came in at $11.3 billion, huge jump from the same time last year owing to the Motorola acquisition but still below analysts' expectations.
As is typical, Google had planned to release its earnings results after the market closed Thursday. The company's shares have been on a tear over the past few months, pushing Google's market value ahead of Microsoft's for the first time. By the time trading halted, Google's market cap had tumbled more than $22 billion from the opening bell, rising slightly again as the share price nudged up before the market closed.
The press release included as part of Google's 8-K filing with the SEC was clearly not meant for public consumption. At the top was the phrase "PENDING LARRY QUOTE," a reference to Google co-founder and CEO Larry Page.
Google blamed its financial printer for the early earnings release.
"Earlier this morning RR Donnelley, the financial printer, informed us that they had filed our draft 8K earnings statement without authorization," Google said in a statement. "We have ceased trading on NASDAQ while we work to finalize the document. Once it's finalized we will release our earnings, resume trading on NASDAQ and hold our earnings call as normal at 1:30 Pacific Time."
R.R. Donnelley and Sons Co. (RRD) did not have an immediate comment on the apparent mishap. Its shares plunged briefly upon the release of Google's statement but later spiked before finally closing down less than 1 percent.
You might think that Google’s earnings report fumble violates U.S. security law, since market-moving information came out at a different time than the company said it would, leaving some investors at an information disadvantage. But while the mistake may be embarrassing, no one is bound for prison.
Companies can release their earnings at any time of the day they choose. Most companies update investors on financial performance before the U.S. markets open, or after they close. But as long as you make a public filing, which is what an 8K is, you can put it out there any time, says Tom Smith, who runs the U.S. investor relations practice for Ogilvy Public Relations.
Still, the time and day of a regular earnings released is scheduled months in advance.“The surprise comes when something in the system disseminates quicker than anticipated,” Smith says. “These things can happen, do they happen often? They don’t.”
Combine this rare process flub with a rare earnings miss by Google, and you can see why investors started hammering the search company’s share price like a well-rested construction crew.
Additional reporting by Michael V. Copeland.
