Citi analyst Mark Mahaney is out with his take on Google's premature earnings.
He is "incrementally 'negatral'" on first pass. We think that means negative to neutral.
Here are the main things he highlighted from the earnings release:
- Consolidated results were worse than expected: Gross revenue was $14.1 billion, compared to street expectations of $14.6 billion. Net revenue was $11.3 billion, versus $11.9 expected. Non-GAAP Operating Income was $3.8 billion versus $4.23 billion expected, and non-GAAP EPS was $9.03 versus $10.57. The bottom line was worse than expected, says Mahaney, because amortization expenses were $317 million, versus his expectation of $197 million.
- The Motorola segment was worse than it should have been: Motorola's top line ($1.78 billion for mobile, $797 million for home) was about in line with Mahaney's expectations. However, the non-GAAP operating loss of $151 million was significantly worse than the $28 million loss he expected.
- Paid clicks are decelerated, but not as bad as expected: Paid clicks were up 33% on a year over year basis. Last quarter they were up 42%, however this quarter was a tougher comparison on a year over year basis. So, Mahaney calls this a "neutral trend."
- Cost per click was bad, but not too bad: They were down 15% year over year versus being down 16% year over year in Q2 on an easier comparison, so Mahaney deems this a "negative trend." He attributes the CPC decline to increased mobile searches as well as ad quality changes.
- And here's why he calls it a "negatral" quarter: "Core Google results were generally in-line to a tad-shy vs. expectations. The biggest deltas were MMI and Amortization related. Not thesis changing, in our view."
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