Through The Fly's Eyes: Google

From Theflyonthewall.com











Do Not Panic Sell

Google (GOOG), the innovative search engine giant, came in with lower operating earnings sequentially which scared off investors in after hours trading. Google management had set as a goal with the investment committee to grow operating earnings sequentially.

A driver for the operating earnings miss was the overspending in headcount and continued investment in data center expansion. But there appears more to it. While not saying so explicitly, Google is hiring aggressively in the international market to address many of the growth opportunities in the world's diverse markets. Management gave the impression that the over hiring was a temporary misstep, but seems, from reading between the lines, more like a focused effort to build out this infrastructure more aggressively. International revenue already makes up 48% of Google's revenue.

Do not use the lightness in operating margins and lack of sequentially revenue growth to panic sell. While Google is a rich company with a $170 billion market cap, most of the earnings lightness was due to greater investment to bring higher quality revenue and earnings growth for the future.