Google's Acquisition of Motorola Is Looking Like a Mess Right Now

By Michael Comeau Oct 18, 2012 2:10 pm

Google released its Q3 earnings report ahead of schedule, and the numbers aren't pretty.

MINYANVILLE ORIGINAL Internet-advertising titan Google (NASDAQ:GOOG) was scheduled to report its third-quarter earnings results after the closing bell today, but communications firm RR Donnelley (NASDAQ:RRD) accidentally released the numbers early in an 8-K filing with the SEC.

And the numbers ain't pretty. Not one bit.

Google's third-quarter earnings came in at $9.03 per share, a massive miss relative to consensus expectations. Revenues excluding traffic acquisition costs were $11.3 billion, which was well below the $11.9 billion Wall Street was forecasting.

Needless to say, this is a major blow to the Google bulls, who seemed extraordinarily confident coming into this quarter. Going into today, the stock was up 30% from the company's second-quarter earnings report on July 19.

Google's acquisition of Motorola Mobility now appears to be a major drag. Motorola mobile device revenue was down an incredible 26%, while the home segment was down 3%.

Technically, this shouldn't be much of a surprise given Motorola's collapsing smartphone market share at the hands of the Samsung Galaxy and Apple (NASDAQ:AAPL) iPhone juggernauts. According to the marketing research firm NPD, Motorola held 12% of the smartphone market in 2012, down from 22% the previous year. (See: Motorola Results Point to Apple, Samsung Dominance.)

But hindsight's always 20/20, right?

Let's hope those Motorola Mobility patents add up to something big, because judging by the Google Nexus 7 tablet, the company is quite capable of building a high-quality mobile device.

At this point, even the most ardent Google bull must question the wisdom of this growth-sucking acquisition.

The mess at Google is taking down a number of Internet stocks in sympathy, including Amazon (NASDAQ:AMZN), LinkedIn (NASDAQ:LNKD), Yahoo (NASDAQ:YHOO), and Facebook (NASDAQ:FB). Since I'm short Facebook, I'm extremely happy about this development. (See: Facebook Hits 1 Billion Users Mark. So Is That a Good Thing or a Bad Thing?)

However, given that a good deal of Google's troubles are Motorola-related, this news doesn't change my already-negative views on Facebook.

Twitter: @MichaelComeau

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