Google shocks market with slow growth

Google's quarterly results fell well short of Wall Street's expectations after its core advertising business slowed, stunning investors accustomed to consistently rapid growth from the internet giant and wiping more than 9 percent off its market value.

The disappointing numbers on Thursday came hours ahead of schedule in a rare instance of premature filing. Google blamed the misfire on an unauthorised filing by its financial printers, R.R. Donnelley, and later confirmed the numbers' accuracy.

The earnings report, which had not been expected until after the market close, revealed a weakening in Google's core internet advertising business and persistent losses at its recently acquired cellphone business, Motorola Mobility.

Shares of Google, the world's No. 1 internet search engine, were down 9 percent at $US690.84 after a brief trading halt. Some analysts said the inadvertent results release spurred confusion and exacerbated its stock price decline.

But other analysts were unnerved by softness in the numbers. Net revenue growth at Google's main Internet business increased 17 percent year-over-year, the first time growth in that business has fallen below 20 percent since 2009.

The slowdown in revenue growth came on the back of falling advertising rates as users shift increasingly to mobile devices, where it charges less than it can on computers or laptops.

"It was just too rapid a deceleration," said Pivotal Research Group analyst Brian Wieser. "Many of the same underlying trends drive Facebook advertising."

On Thursday, Google, which has been struggling to turn around a Motorola Mobility hardware business it bought for $US12.5 billion, reported a 20 percent dive in net income to $US2.9 billion. Excluding certain items, it earned $US9.03 a share, vastly underperforming the $US10.65 analysts had expected, on average.

Google reported net revenue - excluding traffic acquisition costs - of $US11.3 billion for the third quarter, below Wall Street's expectations for about $US11.9 billion.

For the fourth consecutive quarter, the company reported a decline in average cost-per-click (CPC), a critical metric that denotes the price advertisers pay Google.

Average CPC declined 15 percent from a year ago and 3 percent from the second quarter of this year. Analysts say that Google, like many of its peers in the Internet industry, has been struggling to adapt to the rapid consumer uptake in mobile devices. Advertisers pay far less for adds on smartphones and tablets than for similar ads on desktop computers.

Filing snafu

Google, which recently overtook Microsoft to become the second-largest U.S. technology company by capitalisation, had been due to release its results after the market close.

The second paragraph of the press release merely read "Pending Larry quote," suggesting that space was reserved for comment from CEO Larry Page.

"Earlier this morning RR Donnelley, the financial printer, informed us that they had filed our draft 8K earnings statement without authorisation," Google said in a statement. "We have ceased trading on NASDAQ while we work to finalise the document. Once it's finalised we will release our earnings, resume trading on NASDAQ and hold our earnings call as normal at 1:30 PM PT."

Reed Kathrein, a plaintiff lawyer with Hagens Berman who sues companies on behalf of investors, said investors would not have a claim against either Google or R.R. Donnelley because the earnings disclosure was likely a mistake.

"There's no fraudulent intent here," Kathrein said.

However, Google could have a negligence claim against R.R. Donnelly to recover any additional costs it incurred in responding to the incident, Kathrein added.