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Google issues a bad report early, hurting Nasdaq

Associated Press Modified: October 18, 2012 at 3:31 pm •  Published: October 18, 2012
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NEW YORK (AP) — Google plummeted almost $80 per share, more than 10 percent, and trading in the stock was halted two and a half hours Thursday after a disappointing earnings report was published ahead of schedule and surprised investors.

Bleak figures in the report about online advertising dragged down Facebook stock, too, and the Nasdaq composite index skidded 1 percent on a day when the broader stock market was mostly flat.

Google was trading at $754 per share at 12:30 p.m. EDT, then fell almost $20 in a minute after investors saw the report, a draft. It dropped as low as $676, and Google halted trading at 12:50 p.m., with the stock at $687.

The stock was halted until 3:20 p.m. Companies routinely halt trading when they have news to release to investors during the market day, but two and a half hours is an unusually long suspension.

When trading in Google resumed, the stock climbed slightly, but it still finished down $60.49, or 8 percent, at $695.

Google blamed a printing company, R.R. Donnelley & Sons, for filing its quarterly statement with the Securities and Exchange Commission more than three hours ahead of schedule.

R.R. Donnelley & Sons stock also plunged — as much as 71 cents, or 6.5 percent, to $10.14 — after the mistake. It later recovered most of the loss and ended the day down 9 cents.

The Google report said it earned $2.18 billion from July through September, down from $2.73 billion in the same period a year ago.

Profit came to $6.53 per share, and would have been $9.03 if not for accounting costs from employee stock compensation and restructuring charges related to Google's acquisition of Motorola Mobility, a cellphone maker.

Still, analysts polled by FactSet, a provider of financial data, were expecting $10.63 per share.

Besides disappointing investors, the report was an embarrassment for Google. Near the top of the draft, the report said, "PENDING LARRY QUOTE," apparently a place to insert a quote from Larry Page, one of Google's founders.

The earnings report said that Google made about 15 percent less than a year earlier each time a user clicks on an online ad. That is the fourth straight quarter of erosion in Google's ad prices.

It is a warning sign for Facebook, which is trying to figure out how to make money off advertising on mobile devices.

Facebook stock declined 90 cents, or 4.6 percent, at $18.98, with most of the loss coming after Google's earnings report. The company went public in May at $38, but it has fallen as low as $17.55, in part because of investor concerns about ads.

"Google and Facebook are very reliant on online ads," said Scott Kessler, head of technology sector equity research at S&P Capital IQ, a research firm. "So if Google's results indicate a lack of demand and growth, that's obviously a worry for Facebook."

Google is the third-largest component in the Nasdaq composite, behind Apple and Microsoft. The Nasdaq finished down 31.25 points at 3,072.87.

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