Slashdot Mirror
Analysts Are Seeking Guidance From Google
Carl Bialik from WSJ writes "Following last quarter's disappointing earnings, Google's annual analysts' day this Thursday is shaping up as a test of the company's reluctance to provide financial guidance -- and of investors' tolerance of that tight-lipped approach, the Wall Street Journal reports. 'Now, Google watchers expect analysts to bring tough questions on Thursday and to pressure executives for answers that might give analysts greater confidence in their forecasts,' the WSJ reports. 'There's no reason to believe that Google will yield to any such pressures.' However, 'There is one recent sign that the company aims to be more analyst-friendly. Company representatives earlier this month solicited analysts for input on what investors wanted to hear about on Thursday, according to a person familiar with the matter.'"
Google blows away analysts' projections for the first three quarters of last year. Those analysts wise up and factor in some fudge, and suddenly their projections for the fourth quarter are much higher. Google fails to beat the inflated projections and is now suffering an investment backlash?
What gives?
How does providing specific profits and revenue guidance have anything to do with being more than a company that gets its revenue and profit stream from adwords? If Google provides guidance, it's not revealing the secret playbook to become the next Microsoft, it's estimating how many ads it will sell next quarter and year. Investors will learn nothing really new from this, other than a better idea of whether the Forward P/E is 40 or 20 rather than 32. Wall Street analysts, on the other hand, will get a nice benchmark for their own estimates, and get a pat on the head if their estimates are more accurate because of the guidance from google.
Who do you get to be an expert to tell you something's not obvious? The least insightful person you can find? -J Roberts
I loved the tone of a previous Google/analyst call, where the Google's tone was basically
All Analysts do is make companies sacrifice long term opportunities for short term ones.I welcome the company that tells them to fuck off.
Google has a big cash cow -- the search engine advertising. Some of the free things you listed are already making them money, and some have yet to go. But this isn't a fly-by-night company hoping to cash out at a peak.
And your premise (actually, the premise of the entire story posting) is way off. Google's performance was decidely not lacking. They did very well. They just didn't do as well as many expected. If you transferred their numbers over to virtually other company, normalizing for size, the investors would be pissing in their pants with joy. From an investor's standpoint, Google has good long-term health. From the perspective of someone trying to make a quick buck, okay, they failed you. But a) that's not investing but gambling, and b) Google doesn't want your investment anyway.
Rank my idea: http://www.sinceslicedbread.com/node/531
Not exactly. They missed for several reasons, some of them relating to how well their business is run. While revenues were up, so were costs, both from spending more on acquisitions and hiring, and from expensing stock options. And there were a lot of stock options. Also, it is up to the CFO to know inside and out the financials of the company, so when he expects a 30% rate and it turns out to be a 40% tax rate, you have to wonder what he didn't know. Lots of CXXs have been fired for less. You can argue that maybe if they didn't have to pay so many taxes they would have made more money, but then I can argue the same thing... but it won't change the fact that I have to pay them.
Wall Street analysts like guidance because it gives them something to base their own estimates on, which hopefully means estimates overall are closer to the mark.
Google, following true Warren Buffett style, have so far refused to give guidance and I think this will continue.
The problem with giving guidance is it can distract management by putting the focus on meeting short-term estimates, which can be at odds with creating long-term guidance.
For example, let's say you run a company and you've put a number out there for earnings this quarter. You notice your sales are coming in strong, so you'll miss. What do you do? The temptation is to cut back on discretionary spending like, say, advertising, even though doing so might not be in the best interests of long-term shareholders.
Better to just not provide guidance, and let the numbers speak for themselves over time.
MyLinkVault - online bookmarks with a fast drag-and-dr