tv Power Lunch CNBC October 18, 2012 1:00pm-2:00pm EDT
lost right off the top there, even though the stock is halted right now. bertha coombs has been following this story over at nasdaq. thing that leaps out to me, bertha, is that gap net income in the third quarter down significantly from the third quarter of 2011. we need to pull through these numbers and look at how the motorola acquisition may have affected them. the per share numbers were way down, and worse than that, i guess, from the stock investor's point of view is the idea that on a revenue basis and net income basis, it surprised wall street. apart from the fact that the early release was a surprise. >> early release is a surprise, it would be surprising if they had such bad numbers that they wouldn't have preannounced to somehow prepare the street. we are waiting to hear from the company. stock is halted and no doubt on news pending here. we are having trouble actually getting the information on the nasdaq trader site. looks like this is a day for glitches here. no indication yet as to when the
stock will be reopening. but as you can see, before it was halted, certainly took a big hit. come out to the wall and take a look at what the collateral damage is looking like for a lot of the other stocks that are internet advertising related. most of them going to be reporting next week. facebook off more than 3.5%. zynga off 1.4%. microsoft reports this afternoon. search not as huge an issue for microsoft but it is feeling a bit of the collateral damage. amazon which reports next week as well. apple as well. apple, bad news there as well. yahoo! will be reporting next week. certainly much more of an issue for them on search. the shares did come back just a bit along with google. but until we hear from google exactly what happened here and why this foul-up today in terms of this apparent early release of their earnings, we're likely to see this big impact on these shares here at the nasdaq. >> jon fortt i'm sure is digging
into the whys of this. i just walking downstairs here am not sure whether this is a classic case of sort of a fat finger, somebody hit the button on the release with because one of the releases that i'm looking at here has a block in there saying pending larry quote. larry page, of course, the c.o.o. of that company. maybe this release was let go and freed out to the public simply by mistake. that's my speculation, not based on anything authoritative that i have heard. revenues were higher than a year ago at $14.1 billion. that's up about 45%, compared with the third quarter of 2011. but the net income numbers were certainly lower. 2.18 billion compared to 2.73 billion. on an eps basis, it was $6.53 compared with $8.33 in the third quarter of 2011. the non-gap numbers -- 903 compared to 972 in the third
quarter of 2011. on both gap and non-gap, clearly a decline in earnings, in profit there and that is reflected in what you see in the stock, halted now at $678.30. sue? >> indeed, ty, we're going to continue to follow the story all hour here on "power lunch." jon fortt has been digging in to things. we should mention, it is very rare that a company would release earnings during the trading day so obviously this was a mistake. but for those of you who don't follow earnings as closely, you usually do not see a company like google release its earnings during the trading day. what have you been able to find out, jon? >> well, sue, i haven't been able to find out anything from google's side at this point. as tyler mentioned, there is that block in the press release that was released on the s.e.c. site saying that rare larry's q goes here. i looked at google's site itself which is where they normally release these results when they
intend to. didn't see anything on their investor relations site, though it is possible they put something up for a moment, then pulled it down. i'm not sure but it looks like an error that happened through the s.e.c. couple things to point out here. as far as google revenues go, i am noticing comparing to a number of analysts expectations where these revenues fell short, particularly google sites -- that's google's own sites where they expect to collect advertising revenues there. google sites generated $7.73 billion. a number of analysts expected more than $8 billion. well over $8 billion of revenue there. also when it comes to motorola mobility, the consensus in the hardware revenue there was $2.9 billion. motorola did $2.58 billion in revenue. so there are also a lot of costs associated with integrating motorola's business. when i spoke to google executives just several weeks ago, they said that they intended to slowly wind down the feature phone business which is
not profitable really at all. they expected to slowly wind that down rather than do a hard core restructuring. that struck me as a little bit odd, but it seemed to be their plan. we'll see if they are changing that now that they see if those built-in costs might be affecting google's overall performance. >> jon, one thing that sticks out to me -- you've had more time to go through the numbers -- is the cost per click. the percentage decrease in the cost per click seems significant at 15%. what do you make of that? >> well, they've been trying to explain that in terms of tweaks that they've been making to the ad placement on pages. for the past couple quarters, analysts have had a lot of questions about costs per click. google's been explaining that saying part of that has it to do with mobile rarping up and cost per click is rimpb. part of that has to do with how we are making these ads more effective. i'm concerned analysts with these results will only get more pointed. a number of analysts didn't seem to buy google's explanations about cost per click up to this
point. >> scott wapner is across the studio, motioning to me that he wants in on this conversation. mobile's the next big thing. if the costs per click are going down partly because of mobile that doesn't bode well, to me anyway. >> no. there was so much optimism that cost per click was going to improve from the prior quarter, it's down 15% year over year but sequentially, which is from the prior quarter, it was down 3%. so it's still not improving. put it all into perspective. a stock that's up 30% over the last three months. a company that just overtook microsoft recently as the second most valuable technology company. why lass it been able to do that? because there's been a lot of optimism about google's business going forward. you heard sir martin sorrell, the ceo of wpp, on our program in the last hour. guy has his finger on the pulse of the advertising market and even said he was shocked to some respect by what he saw today because, by all accounts, his customers haven't cut back all
that much, especially to companies like google, at least recently. >> does it change the relationship or the race, i guess you perhaps better call it, between apple and google? those are the two companies that everybody's watching right now. is apple and google. do these numbers change apple's strategy at all, scott, or the relationship between those two companies as they continue to race? what do you tihink? >> they already have a fairly contentious relationship. right? didn't eric schmidt say it was the mother of all battles? i mean, look, everybody wants to be apple. this is a surprise though, doc. the stock ran up so much going in to earnings and there was so much optimism. a stealth rally as we referred to it almost every day. >> yep. and just as we were saying top of the show on "fast money," the stock was up 30% for the quarter, roughly. that was most -- if not all of
the year's gains. and the outperformance in this last quarter was notable. the fact that it was either a loading problem where they loaded this release -- rather than the fat finger, they loaded it to be released, at for instance, 4:30 eastern and instead it hits the street at 12:30 eastern time, that's a big problem. there will be a lot of explaining. you and i will be talking about it on "fast money" tonight, we know that. >> jon, what about the nasdaq site itself? bertha said there were some glitches down there, that they were getting a sense of. what impact might this have on the nasdaq site and its ability to process these trades? what do you think? >> well, i noticed, sue, that the nasdaq made a dramatic drop much faster than the dow and s&p 500. bang, it fell about 1%. it cut that in half as google bounced off that $676 low. i don't know if they had other glich glitches but there were crossed markets meaning that people were bidding through the offer and
trying to sell through the bid on a number of names, s, t and i believe various alelabamelphabe order stocks were being hit and crossed. i don't know what caused that. >> steve weis is sitting here as well. at the top of our program as we were sort of placing our bets ahead of these expected numbers after the bell tonight said don't go near this one. the stock had run up so much. steve, want to expand on that? >> i mean, there was so much expectation. google just hasn't been that predictable in terms of the quarters. if you go back and think about just the last two years, some have been great but more have disappointed. so when a stock's up thatch in front of the quarter, you got to believe all the good news and then some is priced in. for me what i'm going to be looking at and hope for an explanation from larry page is why those costs per clicks continue to erode. the company has not been able to explain it in the past but that clearly is the central question. but also with all the android
activations, i'm going to look towards the future and see what so many eyeballs and so many mobile phones on this are going to do for future growth and future earnings, and that i may find encouraging. >> let's go up town to bertha kooch coombs. >> a little bit more color on the nature of the halt. it is a t-1 halt under the code here at the nasdaq. that means that the company has requested the halt. cnbc and i would imagine the world, we all have calls in to google investor relations. no word yet on what they have for a response. you can imagine they are no doubt working very, very hard right now to come out with a response and explain this. the stock right now did not halt on a circuit breaker but rather the company requesting on news pending. we will keep these shares, most likely, see them halted until they issue a new release as to what happened here. >> bertha, thank you very much. herb greenberg at the breaking news desk. >> i was talking to michelle at
footnote.org. she follows these s.e.c. filings. her initial view, it could have been a fat finger by the filing agent which is a third party that's hired to get these things filed with the s.e.c. of course, the one question you have to ask is then why would there have been inaccurate information in the release with the pending quote. but things happen. but i think michelle's insight into this is certainly worth noting. >> i'd like to go out, if i could, to jon fortt and ask him a question that, as i look through this obvious premature release, it talks about traffic acquisition costs and they seem to have had about a $500 million increase compared with the quarter a year ago. son jon fortt, could you shed any light on what traffic acquisition costs are and why they would have risen as much as they did? >> yeah, tyler. traffic acquisitions costs are basically the payments that google ends up giving out to its network partners, people who are running google ads on other
sites. so google will release an overall revenue number. some of that revenue google itself never sees. that goes to partners who are running google ads on their sites and the percentage of traffic acquisition costs, percentage of revenue that represents actually went up i believe to 26% from 24% a year ago. so really a couple things that are interesting to me in this overall story. one, this premature release of information, this glitch and how it is affecting trading. in a way this reminds me of of the facebook ipo in the sense that it might shake people up and have a broader impact on just on google. that's just something i'll be watching. i don't know. another thing here is there's a cost story with google that is not just about google. there's a race right now for market share in mobile. google's in that race, amazon's in that race. they are putting products out there that are not profitable in and of themselves, expecting to make money later on advertising, on media sales, et cetera. when you get something like this
where results that people expected to be one place are actually significantly loafer, investors tend to then focus on costs. there are a lot of costs building up, not just in google but a number of companies that are investing in mobile. they might get some pressure based on these results to explain more about what they're going to do in mobile to control costs, guys. >> you know, jon, if i can go to you, we've obviously seen some technical damage in this stock, if indeed whether it does reopen, when it is open, it remains down 9%. it looks like -- i'm just kind of factoring this in from where we were at the peak -- it looks like it is down at what would be considered a pretty strong support level if it opens down this 9%. would you step in to the stock at that point if it hold that support? >> sue, i'm looking at the 100-day moving average at around $650, $651, something like that. it did not get there but it did break down through the 50-day moving average on the way down to there. so it is right in between.
i think people are going to need to digest, sue, exactly why these clicks are coming in so dramatically. it's got obvious impacts for the likes of facebook which reacted immediately to it, as well as even potentially ebay which did do very well last night and was trading just up over 60 and is pulling back now. >> what about the collateral damage to this? can we put up a chart of facebook? i know we want to keep google up on the board as well, but the nasdaq's down now 29 points. as jon mentioned, it came back up on the trading session so it's obviously taking its toll on the nasdaq. facebook is down almost 4% as well. >> it should be down but what i'm surprised at, although not terribly surprised, yahoo!'s only down 1.3% and that's the closest competitor in terms of search. so there's a lot more hope in yahoo! from the new ceo than there is concern about their business model. to me, i just don't think this really plays in many of the tech stocks aside from facebook,
aside from yahoo!. it doesn't play into apple for all intents and purposes as far as i'm concerned or nest others. >> what's apple doing here? >> sue, alluded to the fact eric schmidt said the mobile battle with apple is the defining fight in technology. >> i wonder if that changes the dynamic of those two or whether it gives apple another foot up. i'm not sure but i find it fascinating. >> you certainly have two companies that do pretty different things. right? apple is a hardware company as well as a software company. they seem to put almost anything out and it sells. maybe google is more tied to the broader economy, so it obviously has some perhaps more built-in risks. >> you look at the knock-on effects of this as you guys have just been talking. i'm looking at the dow, of which google is not a component but it's turned negative now by 15 points or thereabouts. obviously this kind of
disappoint iing report, prematu though it was, has a coloring effect on investors' anticipations about all earnings. intel slowing on pc sales and other things. when you look at a miss like this, would quite rightly cast beyond the immediate company and those in its immediate competitive set to a broader view of the market and looking at whether this pressage is more disappoints. >> i think there is an extremely, extremely small chance, but there is the chance this may not be the right press release. it may not be the right earnings report. very, very, very small. those numbers are prepared weeks in advance. but you can't really throw that out. >> what does management -- to both of you, what does management have to do whether they make a comment?
what do they have to say to the street? >> well, i think they have to address what herb greenberg talked about and that is did the release or the accident that i'll call it an accident, because clearly with larry page's comment here not insert there had, this was accidental release. was that a third party's problem or was that google's problem? and exactly how do they -- does the buck stop there? >> at the end of the day, the early release is a very small, small fraction of the story here. the huge miss on the top and bottom lines are the headlines that we'll be talking about and the reason why you're seeing the stock down and halted $68 down. >> the best thing we got from management is that they know exactly what they have to spend the most time on and get their ducks in order in the next 3 1/2 hours. all the commentators and us have come out and said we really don't get these two numbers, the cost per click and the tack. think that's going to be a very interesting conference call. i'm not going to miss it. it is going to be a lot of fun.
>> it's been an interesting week as well. you had larry page make some public comments for the first time and his voice was obviously hoarse. he's had some issues with his voice so that raised some concerns among investors there. marissa myer who used to be at google lo's now running yahoo! hired a fairly top person from google to go over there. and now this. so they're licking more wounds than one this week. >> i think they are. absolutely. i think perhaps what you're seeing in the stock is reflective of that, scott. i think that's very insightful. there are a lot of headwind for the company and frankly, i'm surprised that they're going to wait as long as they're going to wait to talk to the street. i'm just wondering how long it is going to take them to get this stock back open again. >> that's exactly my question, sue. we're looking at what? about a half-hour or more of the stock not trading. i guess we have no forecast as to whether it might reopen and what it will take to get it reopened and what kind of comment we should expect either
before or immediately after that reopening of the shares. >> what happens, guys, whether it does open? what's your best -- handicap it for me, jon and steven? >> if the news is exactly as steven said, very small chance that something positive comes out as far as this -- these weren't the exact numbers, that would be the outlier, sue. but i think overall people will assess this and the drop is not done yet. in other words, i think that $651-ish number i quoted earlier for the 100-day, i think that gets tested like that. because these numbers are just dismal. the numbers that they put out. and i don't think you're only going to see a 9% drop out of the stock on this. i think it is more like that 12% to 15%. >> let's go to sue right now. >> thank you, guys. i just want to tell you that the early -- earlier this morning, pete, r.r. donnelly, the financial printer -- are we going to herb for this? i've got the release. go ahead, herb.
go ahead. all right. well, herb -- as herb gets miked up, i'll read it to you. earlier this morning, r.r. donnelly, the financial printer, informed us that they had filed our draft 8-page earnings statement without authorization. we have ceased trading on the nasdaq while we work to finalize this document. once it is finalized, we will release our earnings, resume trading on nasdaq, and hold our earnings call as normal at 1:30 p.m. pacific time. herb, what do you make of this? >> that is confirming exactly what we told you a few minutes ago. i was talking to michelle from footnote.org. she said maybe it was the filing agent. if you go to 10k wizard, they list who the filing agent is. filing agent is r.r. donnelly. basically, it was a mistake. but again, it was this third party. as the process goes through, remember, an s.e.c. filing goes to a filing agent, like r.r. donnelly, who ultimately then
gives it over to the s.e.c., it gets on the edgar site and away it goes. >> by the way, that statement that i read was per google. that's the official statement. this is highly unusual though, guys. isn't it? obviously everybody makes mistakes but we don't often see this kind of a mistake, do we? >> i'll point out, r.r. donnelly is trading down 4.5%. it's been a tough short to get off anyway but you could see this trade down even more based upon this. >> when you look at some of these earnings reports, occasionally you get them released, maybe a couple minutes before the close. that's happened a couple times in recent quarters with various companies but i can't remember, ever, frankly, seeing something like this where a company with such a highly anticipated earnings report released some four hours ahead of schedule. >> look at the gap down in r.r. donnelly, now down almost 6%. herb, what do you make of this?
i thought you had had more news. all right, we'll keep talking amongst ourselves. ty, what are they talking about down there in terms of this particular move in the halt in google's stock? what's the chatter on the floor of the nyse? >> google doesn't trade here so there's less chatter than there would be maybe among traders on the desks who do business with nasdaq. but obviously everybody's interested to see when it is going to reopen and what the price is likely to do. as i mentioned a moment ago, you look at some of the bleed effect to even the blue chip barometer, the industrials or the s&p 500 which was struggling early in the day, then briefly went into positive territory and now is negative again by just abo about .25%. but you wonder what google is going to say. obviously we know now that it was not google's error but it was donnelly's mistake. and what employee at donnelly's looking for work this afternoon. >> i would think there is.
does this change the picture, gentlemen, for tech overall? ponder that while we go to bertha coombs. >> you wonder if indeed they had such a big miss, why they wouldn't have preannounced in an official preannouncement. or now, as we'll see when they put out the actual release with regard to what the numbers are. and then the company will ask for the stock to resume trading once that news is disseminated fairly to all investors out there on the wires. whether that will be before the closing bell will be the interesting thing. obviously if they are continuing to maintain their conference call at the regular hour that they had prescheduled for 4:30 eastern time. >> bertha, thank you very much. gentlemen, tech has been one of the bright spots in the market. there have been many as the dow jones industrial average continues to push higher. but when you see a like google reporting earnings like this, all be them released earlier than they would like to be seen, does it clang the picture for
tech, jon and steven and scott? >> i think that the picture was already partially changed by ibm and intel over the last 48 hours. >> exactly. >> the story that intel had to say was not good. ibm, considered a tech bellwether, revenues miss there had. both outlooks weren't all that good so we were already worried about technology before these reports -- this report came in. >> we were. but just as you say, sir sorrell was telling us how strong and how much they are using these types of search that google ultimately gets paid for. and there is no second spot to go to. between yahoo! and google, there's google. as far as the amount of draw that google has and the fact that they are the biggest dog out there, unfortunately today we're looking at them as dog, period. not just the biggest dog but the dog with this kind of result. how they could get to such a low per-click rate is somewhat
astonishing, especially since we have the heavy spend with political season and all the rest. that's the big shocker to me. >> tech is a catch word for everything that relates to technology at all. so to me, as i mentioned before, google is more of an ad model. you really have to pick your spots. to me, i hear this and i hear about android, all the activation. i think that's just great for qualcomm, great for broadcom, great for skyworks. out of this carnage you have to look at where there's opportunity. >> what about r.r. donnelly itself? can you shed some light on this company? it's taking a pretty big hit. their website right now -- i'm quoting directly from the website -- they have more than 60,000 customers worldwide. they helped them to develop custom communication solutions that reduce costs, drive top line growth, enhance roi and assure compliance. >> r.r. donnelly's best days were in the tech bubble. okay? when they printed all the red
herrings, prospectuses, all the financial press. it's been declining since then. this stock doesn't seem expensive at six times earnings but their business keeps going away and keeps going online. this is not going to help them in the least. if i were google, i'd probably move my business elsewhere. >> i'm going to jump in, guys. excuse me. we're going to wrap here, take a quick break. just to recap, google's shares halted for news based on a premature release of the quarterly earnings report and that report was not good at all, hence the stock selling off right now, halted at $687.30. company will have its regular earnings call at 4:30 today. we're going to continue to follow this story for the rest of this hour, and indeed for the rest of the afternoon. we'll be right back with more "power lunch." smart comes with 8 airbaounc3
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not everyone can be a foster parent... but anyone can help a foster child. welcome back. as we continue our coverage of this major google story, an earnings release that was let go too quickly and the numbers in that release very disturbing to investors, a miss on revenue and profit and the result as the stock is halt there had at $687 and change, down 9%. it was lower earlier about $19
billion in market value, shaved just in a half-hour's time or thereabouts. let's go to kayla tausche for the latest. >> what a wild ride the last hour has been for google shares. here's when it happened. at 12:30 p.m. eastern time, an unfinished earnings report was misfired for google, filed in an 8k with the s.e.c. which is how we knew that it was an official document with official numbers, though unfinished because it still said pending larry quote. within minutes shares were down 4% and at 12:50 p.m., 15 minutes later be google announced shares were halted and news was pending. at that very moment a google blog was posted announcing a samsung chrome book to be available for $249. by all intents and purposes, by all conventional wisdom, you have to think that google wanted that news to precede what was an earnings miss on both the top and bottom line. shares fell another 9% after the halt. shares were down, rather, 9% at
the halt. at 1:20 p.m., about ten minutes ago, google blames r.r. donnelly in a release for accidentally filing the 8k with the s.e.c. too early. if you take a look at those two stocks side by side, you can see r.r. donnelly, falling in tandem with google but the difference here is google has lost $19 billion in market cap. r.r. donnelly, just a $2 billion company. a printer of mostly financial documents. that's only lost $78 million in market cap. a lot of value destruction here. hopefully the conference call after the bell will have larry's quote filled in. >> r.r. donnelly used to print something you probably have never even looked at -- phone books. that's how they made their money. now you go to google to look up a telephone number. let's go to bertha coombs -- we don't have bertha coombs. you have seen a phone book, kayla? >> i've seen a phone book.
it is interesting. r.r. donnelly has the majority of this market that files financial documents. if you see any bankers office, they have boxes and boxes of prospectuses filled with those and they're all printed by r.r. donnelly. bh they tried to do a mergeary few years ago, there were competition questions raised because the printing industry is so small that r.r. donnelly effectively operates for all of these big blue chip companies. so it is not as if they have a big option to go outside of r.r. donnelly. they really do own this market, tyler? >> all right, kayla. thanks very much. now let's go up town to bertha coombs and nasdaq who's following the story from her perch there. >> what's interesting, if we can bring up some charts of some of google's competitors. facebook is the one that seems to be taking it most on the chin. facebook will be reporting next week and as we know, their issue with mobile advertising is one of the things that has dogged that stock. so it's really one of the ones that's reacting the today.
yahoo! will be reporting next week as well, not looking at bad. it is up about 1.5%. it tumbled -- all those stocks look like they drop off a cliff. yahoo! has held up a little bit better. ironically this morning there was some speculation about the fact that google now has an october 29th event to unveil some sort of device. there is speculation as to whether they are going to do a phone. certainly the mishap with their earnings report and the actual miss itself makes it a lot less enticing now in terms of the speculation. folks are definitely going to want to hear from larry page this afternoon. >> obviously, bertha, google is a different kind of technology company, but it hasn't been a great week for some of the technology bellwethers. i guess you've got to include google as a tech bellwether such as it is a tech meteorology company. >> yeah. and the interesting thing, too, tyler, when you think about over the last six weeks, both google
and apple investors were clearly very excited about their prospects. both of them hitting massive all-time highs. well above $750. apple was the first to kind of break and go into correction territory. and now we're seeing google. so it will be very interesting in terms of tech investors whether that is going to's a bit of the momentum out when you have these two massive stocks that had really been leading the charge now. a lot of investors kind of taking pause. >> okay, bertha. thank you very much. we'll get back to you in a moment. let's get analyst reaction to google from ben shatner. he joins us on the news line right now. ben, what do you make, one, of the botched release, but, two, perhaps more importantly, the report itself and the miss? >> first of all on a botched release, it is always surprising and disconcerting and i think the market obviously reacted to that. on the actual myth, it is not nearly as bad as at first glance it would appear.
headline is going to be much worse than the actual fundamentals, in large part because the fx adjusted numbers are not that bad. this company is continuing to grow top line very solidly, particularly in the google piece but i think most investors are most focused on the overall. we think it is an overreaction but understandable given the surprise. >> how do you rate the stock -- how did you rate the stock before this event, and has the event changed your rating? >> so we have an outperform rating on the stock, $795 price target. no, it doesn't really change the fundamental story here. obviously we'd prefer to not be surprised like this and certainly we prefer to see the numbers a bit stronger, but there's nothing fundamentally or structurally that's wrong with this company. in fact i think the numbers are quite good on the top line. there are some things on the costs particularly around acquiring content and the cogs for these guys but overall this is not nearly as bad as the market reaction to be if it wasn't such a surprise. >> let me bring in perhaps steve and john to answer some questions as well.
he still likes the stock. >> so ben, let me ask you this. i'm not surprised you like this. you tend to take a very long term view. but let me ask you, where should it be trading given the gravity of this miss? we don't know what guidance is yet so that could be poor also, coming off now a lower base. >> google does not give guidance so you won't get an update on that. >> i mean by guidance, we don't vp analysts going forward in terms of their estimates readjusting to this lower report. >> i actually don't think you'll see numbers move down that much. i don't think the stock should be trading off near what i saw it trading off a little while ago, down 8%, 9%. i don't think numbers will change that much. the adjusted revenue number is still growing 24% year over year. they phenomenal for a company as big as google. i'm just talk offing about the google revenue itself, not the mobile. >> ben, aren't risks starting to line up? is it possible they may just be too much for investors to bear here? if you're at least concerned
about the fundamentals of the business -- i know you're less concerned, but if an investor is concerned about the fundamentals of the business, if they're concerned about the health of larry page, if they're concerned about the escalating competition in the space with facebook and others, if they're concerned about escalating regulatory risk, do you have to step back and take a little bit of pause, don't you? this is not a rose colored glasses kind of story today. >> i certainly agree with that. when i'm speaking to investors, even though i like the stock and would be a buyer here, i can spend an hour just talking about my concerns that are very real and very legitimate. however, you have to keep in mind that even -- and in some ways despite those concerns, this is still a company that's growing top line at 24%. that's a pretty impressive figure given how big they are and what the market opportunities are. >> ben, i'm going to keep you on hold for a few minutes while we take a quick break, if you'd indulge us. we have some more questions about the rest of the technology sector as compared to google, given the situation that we're faced with now. so if you'd bear with us, we'll take a quick break.
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welcome back as we continue our breaking news coverage of google. the shares are halted. there was a premature earnings release for that company. r.r. donnelly, according to google, is responsible for releasing that earlier. they did not have google's authorization. at the company's request, they have halted the stock. it is now down 9% on the trading session. so we continue our situation here on -- with a whole group of analysts and the "fast money" guys are with me. kayla tausche has some continuing information for us as well. kayla. >> sue, we just got word from a google spokesperson that shares are expected to resume trading before today's close. that's of course before they will release their earnings
officially at 4:30 p.m. eastern time and hold a corresponding conference call as well. if you look at shares of r.r. donnelly, they started to bounce back from the lows that they touched after google came out and pinned the blame on r.r. donnelly for this misfiring. but really, google right now seems to be trading on the fundamentals of the numbers and those misses right now, we have no confirmation or denial about the accuracy of those numbers. but because they were filed with the s.e.c., traders, as you can imagine, are counting on these to be the numbers that they see after the bell. if you take a look at -- there's the 8-k misfired at 12:30 p.m. saying "pending larry quote," it is clear this is an unfinished release, though as far as numbers are concerned, that's what traders are trading on. >> appreciate that, kayla. we were able to convince ben shatner to stay on. we all have a lot of questions for you. i'm going to turn it over to john because had he a question.
you have an outperform rating on the stock and i think john might want to take you to task on that. >> not so much, sue. but i do look at the number and that huge miss forgetting about us projecting out into the future, 2013, 2014. just the fact that they missed by $1.60 on what people were expecting. street was basically around 1060. >> i would say there are a lot of adjustments before you get to the bottom number. what we care as investors are the fundamentals of this company. the fundamentals before those adjustment -- a lot of these are related to currency movements and other things -- we care really about what's going on with the top line or operating income from the google side of the business. those are not perfect but they're certainly not that bad. >> sure. but 16% miss on a bottom line number which is what i'm looking at, ben, based on what they reported, certainly seems to imply that the slide of 9% is not enough and that's why as i
said, i threw out a $651 for the 100-day moving average. that seems like it is a lot closer to where the stock could find some support. do you see technically any other levels that you might find support for this stock? >> again, i actually don't think you're going to see the stock slide thatch over the next few days based on this. right now on the headline it looks ugly. it certainly does. i can imagine traders and day traders are going to be moving this thing around but as for the fundamentals, that's for the long term investors that i speak to i think they're going to say, here's an opportunity for owning this stock for a year from now, two years from now. on the day, on the headline, yeah, it is ugly, no doubt. but when you look at fundamentals, i don't see things that are too terrible. the big concern is the gross margin. >> ben, thank you for joining us. we appreciate your patience and we appreciate your insights. i'm going to accepted it down to you, ty. >> my question for you, this not the first time someone's hit the send button a little early.
never a good thing. when this happens, you're here, you have to react. is there the probability that you might overreact and send the stock lower than it otherwise or realistically should go, and then once the real report gets out, the real -- you think about it a little bit, that it is an opportunity to buy in. >> absolutely. but don't forget, there's not just one person that's reacting. right? the way everyone's connected today, there's a lot of people that can react at the same time which can then cause that overreaction. you will a's get that in fact just what you say, the overreaction. >> just get me out of here at any price. >> that's right. it came out expectedly. no one was ready at 12:30. they see it is a big miss, naturally there's overreaction. >> two things strike me. number one, the phrase "pending larry quote" has already entered the vocabulary of america as some extended phrase for "whatever!" that you're going to see a lot. the next thing is if you look at the overall market, we've been in a narrow trading range.
dow only moved 25 points or so. that's not statistically that important overall. i'm rather surprised the market hasn't moved more on that. if you're looking at social internet ad sites, linkedin moved down -- anything associated with social internet ads -- because obviously google was rather negative on the ad situation. so linkedin moved down rather noticeably, as well as facebook here. as for r.r. donnelly, to us, they were the biggest printing company in america when we grew up. not just making the yellow pages. they made all the stick- 'em labels, anything associated with packaging. they were a really big product. what else i'm concerned about -- ibm is really dragging the dow down for the second day in a row. it's down almost 8%. that is an unprecedented drop for two days for ibm in the last two years. >> quick break and we'll be right back after that break with a little more coverage of
google, the story of the afternoon, the stock halted on a 6 68-point decline based on an earnings release that's not pretty and came out too soon. they don't know it yet, but they're gonna fall in love, get married, have a couple of kids, [ children laughing ] move to the country, and live a long, happy life together where they almost never fight about money. [ dog barks ] because right after they get married, they'll find some retirement people who are paid on salary, not commission. they'll get straightforward guidance and be able to focus on other things, like each other, which isn't rocket science. it's just common sense. from td ameritrade.
welcome back to "power lunch." top story here is still google after a premature earnings release hit the tape at 12:30. we want to take a look at volume. we've been talking about the stock and it is moving down now about 9% still, but trading in a big way. look at that volume. more than ten times in the 1:00 half-hour. the volume of any other half-hour since the opening of trade today just about 4.63 million shares traded at the 1:00 mark. i'm told that about 6 million shares have traded right now at ten minutes to 2:00. you can see that there is a lot of movement in the google shares today and you can see that most of that happened, the vast majority of the shares have traded after this release. >> kayla, thank you very much. welcome back to our continuing coverage of the halt in google stock. herb greenberg has been working the phones and waiting patiently in the wings here. herb, what have you been able to find out? >> several bits of irony. one, r.r. donnelly also owns
edgaronline which is a third party disclosure service. more interestingly, it is actually -- these third party filing agents like r.r. donnelly are a remnant of the past. some companies like halliburton and southwest airlines file on their own. irony of course is why is a company like google not filing on its own. if you are looking at r.r. donnelly, is this business that could go away? >> right. indeed. herb, thank you very much. i want to bring back in john, scott, we were talking during the break about what happens to some of these trades. there were probably a lot of people in there who had their stop loss orders in. obviously those probably would have triggered immediately but what happens when the stock opens again? are we going to have some trades that are broken or requested to be broken? >> that will remain to be seen. there is probably not a reason that we would see trades broken, sue, because thus far anyway, it
seems like just a mistake with the release by r.r. donnelly, not with google, with this release. but your point about stop orders -- that's why i don't like stop orders, i like a put option because that stop order becomes a market order or an order to sell at a limit price if that's what you've created and those were just slammed through. so a lot of that volume, big spikes in volume, i'm sure. stock traded down to $676 and it bounced like $30 in maybe a minute and half, two minutes from that time, then got shut down, halted for trading. >> steven, weigh in on whether or not somebody comes in to defend the stock when it opens up if it continues to gap to the downsi downside. it's down 9% on a halt, but do top holders step in and defend the sock? >> without knowing more, i would say no. this is a long-term holding. it doesn't pay them to step in right now. i get it that's what happens
after this happens. disney happened a couple of years ago, it ticked up. the way i'm going to look at this, take $19.50 they miss1 1. they missed, maybe makes mum downside $110. i don't think it gets there. i'm looking at maybe stepping in. i'm going to wait until tomorrow. >> if i'm a longer term investor who's sitting at home looking at this as another market glitch on wall street -- >> then you step in. if you're looking at two years, four years, your fundamental view in that space is positive, then you're going to step in right now. >> this is not a glitch like a facebook botched ipo. an early earnings release isn't so much what's hurting investors today. it is the fact that google missed and they missed big. >> oh, i agree with you. >> that's the thing folks focus
on. >> i totally agree with you. ty, down to you. spencer ante from the "wall street journal" joins us to talk more about this story. to the point they were just mafking, if the earnings had come out at 4:00 p.m. as they typically do, and they are as reported, this falloff in the stock price might not be so abrupt but there was going to be a lot of shedding of value overnight in the after-hours trading and it was going to hit tomorrow anyway. it just hit right now ahead of time. >> yeah. i have to agree with you, tyler. i think there was going to be pain for google today no matter what time they released their earnings. there's two things i see. one is that their core business is not performing as well on the cost side, the cost per click for their ad to increase 15% nap was a big issue in the previous quarter.
a quarter where motorola's results were consolidated. and the results are pretty ugly. the motorola loss is over $500 million, which was much, much more than you saw a year ago. and also the home segment which was profitable and operating profit a year ago also went into a loss. so the numbers look pretty bad for motorola and it's hard to say how things are going to get better for motorola in the near term with the iphone 5 coming out and samsung pushing hard with the galaxy. >> spencer, thanks for being with us. up against a time thing. before we go to a break to recap, google shares still halted. we don't know exactly when they will reopen because of the premature release of an earnings report. it was not a good report.
if you are just joining us -- the story of the day, google a premature earnings release by the third party that google uses to print its earnings release came out in the middle of the market day. the company has requested a halt in its stock. it is down 9% on that halt. they did tell cnbc that they were hoping to open that stock before the end of trading today. ty, i'll send it down to you. >> sue, i'm going to send it out to california. jon fortt who follows google for us. what was wall street looking for and what did google report in quotes? >> actually, if you're in chicago, a couple things. first of all, their core revenues, the core search business, that was weak by quite a bit. revenues came in $11.53 billion, not including those traffic acquisition costs. most of that was from google's own side. it is not just because of exchange rates. google spells out how much of an
impact that had. not enough to make up for the difference there. also costs per click. that was an issue. costs overall. motorola also coming in lower than expected. all that a problem. >> jon fortt, thank you very much. that will do it for this hour of "power lunch." thanks for joining us, sue. >> indeed, ty. that's the story of the day. we'll continue for follow it. "street signs" picks up right now. welcome to "street signs." i'm brian sullivan. all right, google, the big story today. the stock tanking after the earnings release came out early. there is a lot of question now about who is exactly to blame. what exactly happened. was it r.r. donnelly's fault. what liability does google and/or r.r. donnelly face. if you're a google shareholder, what resource might you have? a lot of questions we'll answer here in the next hour on "street signs." the other thing surprising investors is not just the e
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