CNBC Ignores Google Earnings Drop, Yahoo! and Microsoft in Trouble?

Erik Linask : Convergence Corner
Erik Linask
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CNBC Ignores Google Earnings Drop, Yahoo! and Microsoft in Trouble?

It provides no guidance as to earnings, so Google's reported $5.10 non-GAAP earnings per share for Q4 2008 was welcome news today -- or was it?  While the figure highlighted by CNBC immediately following today's closing bell on Wall Street certainly bears noting, it is in sharp contrast to the $1.21 GAAP earnings per share the search and advertising giant reported.  That's a 70 percent dip from Q3 2008.
 
Regardless of which EPS figure you look at, the increased revenue is a positive, as is the uptick in stock prices following the close of the market today.  But what sticks out is that CNBC completely overlooked the sharp drop in earnings over a quarter ago in its initial reporting. I understand the need to accentuate the positive, but a 70 percent hit is tough to hide, and at the end, Google did beat expectations, and is well positioned moving forward.
 
Porter Bibb of Mediatech Capital Partners, speaking on CNBC following Google's announcement, declared Google undervalued.  "Although the bigger you get, it's hard to get even bigger, they own advertising," he said.  Even if Microsoft and Yahoo! Come together, they won't be able to touch Google."
 
Of course, it doesn't help that Yahoo! is somewhat in shambles right now, not sure whether it is a content aggregator or an advertising firm.  Google knows what it is and where it is going.  For Yahoo!, MS, and any other would-be competitors, Google has its sights set on at least two markets where it could become a disrupting force, as it has in the search space.
 
Everyone is talking about the iPhone and the BlackBerry Storm, but few are talking about the Google Phone, T-Mobile's G1.  Rich Tehrani recently wrote about predictions that open source communications solutions will dominate the market by 2010.  The market is focused heavily on mobility already, and with an increased tendency towards open source, Google will again have the advantage.  "It will be the next home run for Google," said Bibb.
 
And, if you ask anyone following the communications space, cloud computing is on the rise as one of the hottest topics today.  Well, Google Docs is nothing more -- while at the same time being much more -- than a set of cloud-based applications that offer the effectively MS Office functionality.  Again, the company already has its foothold in a space the rest of the market is only beginning to discover -- and why not? Why pay for an application you can get for Google for free, and not have to use hard drive resources. Windows 7 is likely to take a hit in uptake as a result.
 
So yes, Google's earnings are up, and despite its GAAP EPS being 70 percent below last quarters, its results are slightly above expectations.  And it's shares are up in after hours trading.  More importantly, it holds a dominant position in its primary business, and has a solid reach into two areas expected to be the future of the communications by many. Whatever MS and Yahoo have in mind, they may already have played themselves out of the game.


 


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