Thursday, April 7, 2011

Google Inc. (NASDAQ: GOOG): Q1 Earnings Preview 2011

Google Office

Google Inc. (NASDAQ: GOOG), owner of the world's most-popular online search engine, is scheduled to release first quarter earnings after the closing bell on Thursday, April 14, 2011. Analysts, on average, expect the company to report earnings of $8.13 per share on revenue of $6.44 billion. In the year-ago quarter, the company reported earnings of $6.76 per share on revenue of $5.06 billion.

Google Inc., a technology company, maintains index of Websites and other online content for users, advertisers, Google network members, and other content providers. The company's innovations in web search and advertising have made its web site a top internet property and its brand one of the most recognized in the world.

In the preceding fourth quarter, the Mountain View, California-based company's net income was $2.54 billion or $7.81 per share, compared to $1.97 billion or $6.13 per share in the fourth quarter last year. On an adjusted basis, the company earned $8.75 a share in the second quarter. Revenue increased to $8.44 billion fom $6.67 billion in the previous year quarter. Analysts, on average, expected the company to report earnings of $8.06 per share on revenue of $6.04 billion. 

Google is the undisputed market leader when it comes to web search. Google leads the search market with a share of around 68% while competitors Yahoo (NASDAQ: YHOO) and Microsoft (NASDAQ: MSFT) are way behind Google. 

Google is also pursuing an aggressive strategy in rapidly growing mobile market. According to market research firm EMarketer, U.S. mobile advertising spending will grow 43 percent this year to $593 million from $416 million last year. Mobile ad spending is forecast by EMarketer to grow almost threefold more by 2013, reaching $1.56 billion. In mobile space, Google is taking on Apple Inc.'s (NASDAQ: AAPL) iPhone with its Android operating system. Google has made its Android operating system software available on a variety of different mobile devices. 

Market research company, comScore 's mobile subscriber market share report for the three month average period ending February 2011 indicates that Google's open source operating system, Android continues to increase its popularity in the United States. The report revealed that Google Android grew 7.0 percentage points since November, strengthening its number 1 position with 33.0 percent market share.  Android stole nearly all of that from Research In Motion, which lost 4.6% and dropped from 33.5% to 28.9% of the U.S. market. Android also stole some share from Microsoft and Palm, despite the fact that Windows Phone 7 launched in the latter part of 2010 and Palm (now owned by HP) launched a new smartphone on Verizon's network in the three-month periodIn the same three-month period, Apple's (NASDAQ: AAPL) market share increased only from 25% to 25.2%. According to Gartner, Android will run on 49 percent of smartphones sold next year.

Google has been leveraging its Android operating system to make major gains in the smartphone industry. According to media reports, the internet search giant is now working on a mobile-payment service that would allow shoppers to use their mobile phones rather than credit cards to pay for goods in retail stores. For Google, the move would help advertisers more effectively target consumers and allow merchants to push coupons and loyalty schemes to customers.

However, Google is facing growing scrutiny from regulators as it bolsters its search business. According to media reports, the U.S. Federal Trade Commission is considering a broad antitrust investigation into Google’s dominance of the Internet-search industry. Meanwhile, officials in European Commission are examining whether Google discriminated against other services in search results and stopped websites from accepting rival ads. A complaint from Microsoft last month may expand the investigation to online video and mobile phones.

Among other developments, starting April 4, Larry Page, Google Co-Founder, took charge of Google's day-to-day operations as Chief Executive Officer. Eric Schmidt assumed the role of Executive Chairman, focusing externally on deals, partnerships, customers and broader business relationships, government outreach and technology thought leadership. Internally, Schmidt would continue to act as an advisor to Larry and Sergey. Sergey Brin, Google Co-Founder, would devote to strategic projects, in particular working on new products.

The company's stock currently trades at a forward P/E (fye Dec 31, 2012) of 14.38 and PEG Ratio (5 yr expected) of 0.91. In terms of stock performance, Google shares have lost nearly 4 percent since of the beginning of the year.

Full Disclosure: None.
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