January 31, 2006

Google Missed: I told you so :)

Posted in Category: Work — Amr Awadallah @ 8:31 pm | link | | comment (0)

First, I was pleasantly surprised to see that CNN Money quoted and linked to my blog (just a few hours before my prediction came true, I made this prediction about more than 2 weeks ago):

Rival trashes Google’s growth prospects

However, I was very upset by the wording they used in that title. My blog represents my personal views and do not reflect those of Yahoo what so ever, also I did not trash Google. Its misquotes like this that cause bloggers major problems and could potentially lead us to stop writing, so please be careful next time.

Now its time to gloat 🙂 Google earnings are out, their sequential gross revenue growth was 22%, which did not just miss the 30% that the bulls were predicting, but also barely met the lowest of the sequential growth estimates (which was around 23%).

To top it off, Google also increased and plans to increase its spending significantly. They hired 700 more folks in Q4, they doubled their sales and marketing spend (over 2004-Q4), and they said their expenses are likely to rise significantly as they invest in long term projects. So its really a double whammy from top and below.

That said, 22% sequential growth for a $1919M Q4 is still very impressive, but it missed the expectations and it certainly does not justify the $500 to $600 stock price targets that some analysts are setting. To put things in perspective, Microsoft with a marketcap of $300B did $11B in sales last quarter, that is almost double what Google made for the whole year, so how can Google get a marketcap of $150B (at $500 price target). I think Greenspan had a word for this, let me try to remember, ah, he called it “irrational exuberance”.

— amr

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