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Tuesday, January 31, 2006

Google earnings and after hours reaction 

Before blaming Google for their lower-than-expected earnings and the inevitable stock punishment tomorrow, let's get one point clear. The company reported stellar revenues and earnings for their past quarter, they just didn't live up to the lofty expectations.

It's not Google's fault that traders got euphoric and drove the share price up to unsustainable levels. What is to follow is a natural correction by the market which might have finally discovered that a company, no matter how successful, can not be expected to conquer the world, and do it in such a short period of time.

The market forces are always at work to equalize the paying field. Unfortunately there are always a few companies the manage to reach super-stardom and make people lose their sense of reality for a while.

Google is a great company, but it would be irrational to expect it to grow so far so fast. There are always natural barriers to out-sized growth. Some initiatives do well, while others languish, a company could get hit by unforeseen missteps, regulatory issues, competitive forces, and setbacks that are just part of fast growth. The earnings miss is perhaps a blessing in disguise to allow Google to shake its speculative side a bit, and get on with the task of creating great products.
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<Google earnings and after hours reaction>

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