Remember last quarter, when Google’s stock roared higher before earnings only to have the company “overspend” and miss the bottom line (sending it temporarily tumbling back down)? Well, we thought the Street overreacted–and are glad to see that it did–but with GOOG charging ever higher again, we can’t help but wonder if we’re going to see a repeat of the same bottom line miss. Why?
First, in recent weeks, two analysts–Benjamin Schachter at UBS and Rob Sanderson of ATR (both via Eric Savitz at Barron’s)–have suggested that Google’s pace of hiring has slowed considerably. Schachter based his conclusion on counting help-wanted ads and Sanderson referenced some “anecdotes.” So, assuming the analysts are right, why would Google slow hiring? Perhaps because it’s hired enough people. Or perhaps because it is once again worried about the bottom line (which itself could suggest a top-line problem).
Second, Google’s CFO George Reyes recently announced, suddenly, that he was going to retire. We think George has done a good job, and we doubt that his departure has anything to do with performance. That said, when CFOs leave suddenly, there’s always that nagging concern… Is George’s departure in any way related to last quarter’s bottom line miss?
To play devil’s advocate, we also need to point out that a slowed pace of hiring could actually be great news for the quarter: If Google’s revenue is strong and Google’s hiring has slowed, then margins might actually improve! Imagine what that would do for this already turbocharged stock.
UPDATE: A reader reports that Eric Schmidt said that Google would be slowing hiring, which I missed. If so, this suggests it’s not an intra-quarter decision.