Google issued it’s first quarterly report ever yesterday. This marks a turning point for the previously secretive company as the report provides the most detailed financial picture the company has ever released. Google has more than doubled its earnings from the same period in 2003. In last year’s third quarter, Google reported a net-income of $20.4million. In the quarter ending yesterday, Google’s net-income jumped to a staggering $52million, riding on quarterly revenues of $805.90million. At this time last year, Google reported revenues of $393.90million for the third quarter. In one year, Google’s revenues grew over 105%.
Google’s stock surged upwards in floor trading yesterday, closing at $149.38 per share, an increase of of 6.33% but jumped another 8.25% in after hours trading, opening this morning at $161.70 per share. Share prices have nearly doubled in the two months following the IPO cost of $85/share in mid-August.
Some investors were very impressed by Google’s third quarter showing with Prudential raising its 2004 / 2005 earnings estimates to $200/share, up from its previous set-point of $130. Marianne Wolk, an analyst with Susquehana Financial Group noted, “It was a very impressive quarter. I would expect fourth-quarter numbers to move higher.”
Other analysts were not as impressed, suggesting Google’s growth does not justify the highly positive reactions of the market. In a conference call with journalists, Google CEO Eric Schmit reiterated his statements that Google was a different sort of company and would not be offering any analysis or short-term guidance for investors of it’s business plans. “We can’t adequately answer the question of whether the company’s stock is overvalued until we can tell what the company is,” said David M. Garrity, a financial analyst with Caris & Company. Fearing another stock-bubble based more on investor enthusiasm than bottom line reality, some analysts remain on the sidelines taking a wait-and-see approach. Garrity did praise much of what he saw at Google, noting that Google uses software offered freely to consumers on the web to attract viewers, a strategy that will be difficult for companies such as Microsoft to compete against.
As a note in Google’s favor, investment firm SG Cowan and Company predicts the paid search market to grow 38% each year for at least the next five years. Paid search was worth about $2.6billion last year and is projected to jump to over $13.4billion by the start of 2009. This projection supports the statement by Schmit that, “…demand that exists for the kind of advertising we do is really quite large and to a large degree unmet.”
Google not only survived its first major round of financial scrutiny, it managed to impress a tech-wary Wall St. yesterday. Here is the numbers reported in our first Google quarterly report-card:
Google – Q3, 2004 – Report Card
Revenues: $805.9million (up 105% from Q3, 2003)
Net Income: $52million (up 106% from Q3, 2003)
Cost per share: $161.70, Oct. 22 2004 (up over 90% from IPO in mid-Aug 2004)
Advertising Revenue:
> 51% ($411.7million) from ads appearing on Google owned sites
> 48% ($384.3million) from partner sites through Google AdSence
> EBITDA ($321million) up from $278million in second quarter 2004
> Cash on hand: $1.86billion
> Employees: 2668 full-time as of Sept. 30, 2004
For a very detailed balance sheet, please visit http://investor.google.com/releases/2004Q3.html
Google stock price continues to grow, demonstrating investor confidence in the brand and its products. With a market lead in areas such as localization and a growing list of useful add-on tools such as Gmail and Google Desktop, the investment community clearly sees Google retaining its dominance and continued growth.
Jim Hedger has written a widely read search marketing column for over five years. Co-host of Webcology on WebmasterRadio.FM, Jim is a writer and SEO consultant with Metamend Search Engine Marketing in Victoria BC.
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