Friday, January 20, 2012

Why is the financial world in the crapper?

Well, I would say that this is a perfect example:

Google revenues worse than expected
Google reported a 27% increase in revenues for the last three months of 2011, but even that was not good enough to meet Wall Street estimates, sending the shares tumbling.  Google shares fell 10% in after-hours trading to $575.  It reported 3-month revenues of $10.6bn (£6.8bn). Its net profit rose 6.4% to $2.7bn.

I saw this kind of idiocy when I worked at an internet auction company during and after the dotcom boom and bust of 2000.  When they would post their earnings, they would always beat their own estimates, as well as Wall Street's estimates.  However, everyone expected that.  After the announcement there would be a huge selloff and forecasts of doom.  Why?  Well, you see, they only doubled what Wall Street estimated.  The analysts expected them to triple it.  How dare they only double the earnings expected!

Now I am seeing the same silliness here and it just floors me.  For reference, lets put those numbers in perspective: 

"For the full year, Google reported a 29% rise in revenue to $37.9bn, with net profit up 14% to $9.7bn."

Got that?  Your financial advisers are disappointed in a net profit of $9.7 billion (with a B) dollars for the year.  From a company who's entire product line exists only as electrons and who made it big by first enabling you to happily find the best porn on the internet in the shortest amount of time.  I have always felt that the stock markets really have no basis in reality, and stories like this only further re-enforce my belief. 

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