Google falls hard after CFO comments

Wed Mar 1, 2:01 AM ET
source: http://news.yahoo.com/s/afp/20060301...N5bnN1YmNhdA--


NEW YORK (AFP) - Internet star Google lost more of its luster after the company's chief financial officer indicated slower growth ahead for its key search advertising business.

Google shares plunged as much as 13 percent after the news, dragging down much of the Internet sector. The stock recovered to end with a loss of 7.1 percent at 362.62.

Chief financial officer George Reyes told investors at a Merrill Lynch conference that growth at the world's leading Internet search provider is slowing.

Reyes said that Google's efforts to squeeze more profit out of its system of placing ads in Internet searches will yield fewer benefits in the future.

"Search monetization gains have largely been realized," Reyes told the audience at the Millennium Broadway Hotel in New York.

From now on, growth will come from other "organic" factors such as an increasing number of search queries, Reyes said.

Although Reyes said he is not "turning bearish," he added that "at the end of the day, growth will slow."

Google issued a statement after the market close, saying it wanted to "clarify" Reyes's statement.

"Monetization improvements will continue to be a key factor in driving future revenue growth. We still see significant opportunities to improve monetization and intend to continue to focus our efforts in this area," it said.

The company recalled that it had already stated in filings with the US Securities and Exchange Commission that "our revenue growth rate has generally declined over time and we expect that it will continue to do so as a result of the difficulty of maintaining growth rates on a percentage basis as our revenues increase to higher levels."

Reyes's presentation was carried live over the Internet, and an archived version was posted on Google's website.

Google shares had their biggest one-day drop earlier this month after the company reported fourth-quarter profit that lagged the expectations of Wall Street analysts.

The stock, which rose more than fourfold from its August 2004 public offering to an intraday high above 475 dollars in mid-January, has now lost more than a quarter of its value as investors worry that increased competition and other factors may slow Google's growth.

Google's comments hurt the entire sector. Among the Internet bellwethers, eBay lost nearly three percent, Yahoo two percent and Amazon.com 1.5 percent.

Valueclick fell 5.6 percent following the online marketing company's financial results, which included an earnings revision for its fiscal 2004.

Lost in the storm over the comments was a survey released Tuesday by comScore Research showing Google strengthened its hold as market leader of the US search market with a 41.4 percent share, up more than six points from year ago. Yahoo maintained the second spot in the ranking with 28.7 percent share.

Analyst Patrick O'Hare at Briefing.com said Google's stock fall is reflective of its mercurial rise.

"For a highflying stock like Google," O'Hare said, "any indication that growth is slowing is all that is needed to prompt a bearish reaction as a sell first, ask questions later mentality is the modus operandi of momentum investors."

Philip Remek at Guzman and Company said the question is the pace of Google's deceleration.

"Everyone knew about the law of large numbers that would have to come down, so I guess the question now is how much the growth will come down and will it come down so much this year," he said.

"The company is still performing very, very well but the question's coming from a hyper growth rate to a more normalized growth rate."

But Ed Stenson and Jon Lewis at Schaeffer's Research said in a note that the reaction to the Google comments were surprising, because the red-hot growth pace had to slow.

"Unless investors imagine that extraterrestrials are going to be using the search engine soon, the kind of growth rates we've seen recently have got to slow down," they wrote.

__________________

This was bound to happen at some point... I think Google in part realizes the nonsensical way the stock market behaves and they probably haven't split shares because they realize they are probably higher than where they expect to be when the hype dies down and as thier CFO said, they reach a certain level of saturation in advertising.

__________________
My Best-Board journal chronicaling my adventures in admining!
Latest Entry: Revenue Forecast: Good!

I agree, and have been waiting for this to happen. It was bound to happen sooner or later, and I think it will climb once again. I know some forecasters still think they will hit $600.

__________________
New @ EarnersForum.com ~ Free Ajax Keyword Rankings Tool
Recent Audio Interview ~ Chad of DirectoryVault.com + More