Google Misses Earnings, Partly Because of the Cost of Creating Google Foundation

Google released their fourth quarter 2005 earnings today at 1:30PM Pacific Time. To summarize, although Google performed spectacularly, they didn’t please Wall Street, resulting in after hours trading activity that shaved 10-20% off the stock price. This translates into a 60-70 dollar decline in the stock price. Its a BIG deal when stuff like this happens, and money swings so much in such a short span of time.

The reason why I write about it here is because part of the reason why Google said they didn’t perform as well in the fourth quarter was because of its contribution in the creation of The Google Foundation, which is the philanthropic arm of Google.

Here is a link to Henry Blodget’s blog. Blodget is a famous former equity research analyst and he gives us his opinions on what happened today to Google’s stock.

The early brouhaha about an “earnings miss” seems a bit exaggerated, because much was attributable to the company’s gift of $90 million to the Google Foundation and an unexpected spike in the tax rate.

I think its great that a company can do this much to support philantrophy but their stock certainly paid for it. The problem is that a corporation can’t work if shareholders aren’t happy, and this sort of generosity is hard to sustain if the tradeoff is decline in the price of company stock.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>