Google sets a record, but not the good kind

Google shares had their biggest one-day decline ever Friday, dropping $52.12, or 9.8 percent, to $481.32 as they were punished by investors digesting the Internet search giant’s second-quarter earnings that were released after the markets closed Thursday.

If not for costs incurred for employee stock compensation, Google said it would have earned $4.63 per share. That figure missed the average earnings estimate of $4.74 per share among analysts surveyed by Thomson Reuters.

Much was made of Google Chief Executive Eric Schmidt’s use of the word “challenging” to describe the economy and the first-time participation of the the company’s chief economist, Hal Varian, in its conference call Thursday, not to mention a slowdown in the company’s hiring pace. It only boosted its workforce by 448 last quarter.

The previous record drop in Google’s stock price took place earlier this year on Feb. 1 when it fell $48.40, or 8.6 percent, to $515.90. That was the day Microsoft first announced its intent to buy Yahoo. They are down 30 percent so far this year.

At the end of the week Google shares were trading at 32 times earnings. And Yahoo? 48. (Note to Carl Icahn — that price-to-earnings ratio for Yahoo is based on a closing price Friday of $22.45, somewhat south of the $25 you are estimated to have paid for your 70 million shares.)


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