Articles of the Day


Google Q2 Revenue Solid But Income Is Light; Stock Whacked — Google has announced Q2 revenue ex-TAC of $3.9 billion, just a shade above analyst estimates of $3.87 billion. GAAP Net income was $1.25 billion or $3.92 per share. Non-GAAP EPS came to $4.63 per share, which looks light. Analysts had been targeting $4.74. This should be an interesting call (4:30 PM ET). Revenue on Google’s own network grew a still-quite-impressive 66 percent year-over-year to $3.53 billion, though on a sequential basis, this was up just 4 percent from Q1. Network revenue grew by just 22 percent to $1.35 billion. Some highlights: International now represents 52 percent; paid clicks slipped 1 percent sequentially and was up 19 percent year-over-year; total headcount, always a key metric at the ever-expanding company, stood at 19,604, up from 19,156 at the end of Q1. That’s a smaller increase than the 851 employees Google added (ex-DoubleClick acq.) last quarter.

Microsoft Q2 Revs Rise 18 Percent; Operating Income Up 42 Percent; Q3 Forecast Disappoints — Thanks in large part to strong sales of products related to its Xbox games, Microsoft said Q2 revenue came in at $15.84 billion, an 18 percent rise over last year. Operating income and diluted earnings per share during the quarter were $5.68 billion and $0.46—42 percent and 48 percent higher, respectively, over Q207. For FY08, which ended on June 30, Microsoft’s revenue was $60.42 billion, also an 18 percent compared to the previous fiscal year. Operating income and diluted earnings per share for FY08 were $22.49 billion and $1.87, representing yearly growth of 21 percent and 32 percent, respectively.

Yahoo Lays Out The Case For Its Board… All Over Again — If you’re a Yahoo shareholder, but you don’t obsessively follow the twists and turns of the Yahoo-Microsoft-Icahn drama the way some of us do, then Yahoo has put out a letter just for you. Basically it’s: here’s our argument, one more time, for why you should elect the existing board. Real quickly now, here’s a summary: We’re moving forward on a plan to be a global internet leader, including dominating in ads and working with Google. Also, it’s possible we may look at getting some value from our Asian assets, maybe (that last part may be newish). Carl Icahn? That guy’s just a short-term agitator in bed with Microsoft. Because he’s signaled that Microsoft is his only exit plan, he has no leverage. And neither he nor his board have any operational chops or internet experience.

Google Deliberately Sells Fewer Ads — Google “blithely insisted that all was well” during its second quarter earnings call on Thursday, but investors begged to differ, sending shares plummeting in after-hours trading after the company missed The Street’s earnings-per-share estimates by nearly ten cents per share. Unlike other companies, Google has decided not to offer any guidance in advance of what its sales and profits will be, which it makes it more difficult for Wall Street analysts to forecast the company’s quarterly results. The strategy has proven to be a double-edged sword for Google in the past. Hal Varian, Google’s chief economist, admitted softness in certain ad categories like auto lending and real estate, but said that other economically sensitive were holding up, like home appliances. “We have a little bit of the Wal-Mart effect going on,” he said. “As times get tough, people will watch their dollars, and in many cases, that means doing more shopping online.”

Blow To Icahn: Legg Mason To Support Incumbent Yahoo Slate — Icahn’s proposed Yahoo board slate may be toast. Legg Mason, a holder of 60.7 million shares (4.4 percent), has decided to support the incumbent Yahoo slate. In a statement, Legg Mason Capital Management Chairman Bill Miller endorsed the actions of the current board during its back and forth with Microsoft, saying they acted with “care and diligence.” He did say, however, that he would be happy if Yahoo and Icahn reached some sort of compromise: “In general, we believe it is appropriate for large shareholders to have representation on corporate boards if they so desire.

Microsoft, Yahoo Uninterested As Time Warner Floats AOL — It would appear that the so-called “urgent” AOL acquisition talks with Microsoft and Yahoo reported yesterday by Reuters were precipitated by people close to the Time Warner company, as The New York Times is today reporting that neither Microsoft nor Yahoo appears much interested in the once-mighty Web portal. Indeed, the Times claims that while both companies are listening to Time Warner, they seem to be more focused at the moment on their talks with each other, which have gone back and forth now for more than five months. Richard Greenfield, an analyst who covers Time Warner for Pali Capital, says that any deal involving AOL is unlikely before Yahoo’s crucial Aug. 1 shareholder meeting, during which company shareholders will be asked to vote on a slate of new directors proposed by billionaire investor Carl Icahn, who would like to replace Yahoo management and then sell all or part of the company to Microsoft.

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