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Google Earnings – GOOG Stock Proves (Again) That It’s Bulletproof

Google (GOOG) reported earnings after the close Wednesday, and proved to investor once again that it can do no wrong.

google-stock-goog-stockGoogle earnings forecasts were for $16.75 billion in revenue and earnings of $12.26 a share; GOOG exceeded on the top line but missed on the bottom line pretty significantly, reporting actual sales of $16.86 billion and profits of just $12.01 per share.

Furthermore, advertising rates (known as “cost per click” in marketing-speak) were down 11% year-over-year despite the fact that volume was up. That reaffirms the troubles shown by fellow online advertising giant Yahoo (YHOO) with a soft display ad market.

Still, Google stock was up slightly in after-hours trading despite these soft numbers.

Why? Well, because of two other interesting pieces of news that seem to be providing hope for GOOG stock.

First, earnings were held back by mounting losses at Motorola that weighed significantly on the bottom line — but Google surprised Wall Street today with news it is divesting itself of the money-losing Motorola hardware division for $3 billion or so after buying it for around $12.5 billion in 2011.

This was crucial to the after-hours strength in Google, since that sale changed the narrative from “Will Google ever figure out hardware like Apple (AAPL) has?” to “Good for Google for admitting its mistake and moving on.”

Also, Google is keeping the patents, so it’s not like $9.5 billion has just evaporated, but it’s definitely a big deal — mostly because it changes the long-term trajectory of the company in the eyes of investors. If Google is out of hardware, then investors can focus on the core ads business and the plans internally for the next big thing.

So what is that big thing?

Well, Google acquired U.K. artificial intelligence company DeepMind for $400 million over the weekend, and also recently snapped up Nest Labs, which builds smart thermostats and fire detectors, for $3.2 billion.

Another great headline-grabber? In its earnings report, Google announced it is planning a stock split in April after shares have run up to over $1,100 a piece. GOOG stock is one of the most expensive on Wall Street, and this will appeal to those folks who care about “cheap” share prices.

As you can see, the takeaway from Google earnings alone isn’t incredibly encouraging … but the company has done a great job preparing for these disappointing numbers by moving on with acquisitions, the Motorola sale and other strategic initiatives that hopefully will pay off in the long term — or at least distract investors in the short term.

Who knows whether this will ultimately result in growth across 2014 or 2015. But for now, investors are willing to grant Google a pass on these bad numbers.

Jeff Reeves is the editor of and the author of The Frugal Investor’s Guide to Finding Great Stocks. As of this writing, he did not hold a position in any of the aforementioned securities. Write him at or follow him on Twitter via @JeffReevesIP

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