How to Play Google Earnings (Hint: Don't Forget the Sale of Motorola Homes)

This past Friday, Google's (NASDAQ:GOOG) Chief Accountant posted a cryptic note on the company's investor relations page, stating that the majority of analysts do not fully understand the pending Motorola Home sale's impact on their financial reporting.

 

The statement goes on to explain that the majority of analysts have incorrectly included the $2.35 billion sale of Motorola Home to Arris Group (NASDAQ:ARRS) in their 2012 sales estimates when the number should be included in the separate line item of 'discontinued operations.'

 

Should this hold true, the consensus estimate of $10.54 earnings per share on revenue of $12.3 billion could be 'misunderstood' nearly by 20%.

 

Other concerns include stagnant desktop growth, over-diversification, and a slowdown for the Android operating platform. Its marketshare of desktop search dropped to 88%, the lowest in five years, while rivals Microsoft (NASDAQ:MSFT) Bing, Yahoo (NASDAQ:YHOO), and even Ask.com showed gains. Equally disconcerting is the prospect of slowed growth for the Android platform, especially in light of strong European numbers for the Windows phone.

 

My trade: 680-660 Bear Put Spread

Risk: $600 per 1 Lot

Reward: $1400 per 1 Lot

Breakeven: $674