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Summary:

If you are a baseball fan, then you have seen Gary Sheffield swing the bat, you get a feeling that if the bat connects with the ball, then the leather is in for some serious hiding. The non scientific description of such an act is called […]

If you are a baseball fan, then you have seen Gary Sheffield swing the bat, you get a feeling that if the bat connects with the ball, then the leather is in for some serious hiding. The non scientific description of such an act is called ‘hitting the covers” (or hit the cover) off the ball. Well, that’s exactly how one feels about Google’s fiscal performance for the fourth quarter 2006 and for fiscal 2006.

Google just reported its fourth quarter 2006 sales of $3.2 billion, and net income of $1.03 billion. The sales for fiscal 2006 are $10.6 billion, and profits for the year came in just over $3 billion. By itself, these numbers don’t mean anything. However, if you put them in context of what Wall Street was expecting, then you understand why Google just took a Sheffield type swing.

For starters, the most optimistic estimate for the 2006 revenues was $7.3 billion, and they just blew past that number. They were supposed to do $10 billion-plus in sales in 2007. Google is in a bit of a hurry. For the fourth quarter 2006, the high end revenue expectation were $2.31 billion. This is a moon shot.

Interesting tidbit from the earnings release:

Other cost of revenues, which is comprised primarily of data center operational expenses, as well as credit card processing charges, increased to $307 million, or 10% of revenues, in the fourth quarter of 2006, compared to $223 million, or 8% of revenues, in the third quarter.

More later. Meanwhile enjoy TheStreet.com coverage.

  1. Don’t they always beat Wall Street’s expectations?
    $3 billion profits is a lot!
    They’re a giant, and it’s becoming scary…

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  2. they beat expectations, but not like this. man that is too much – revenue upside surprise $3 billion for the entire year. that is scary

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  3. so why is their stock down in after hours trading?

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  4. what percentage of that ‘profit’ is click fraud? half i bet (and i’m being modest).

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  5. I certainly hope the “Boys” are able to keep the accountants/cfo/etc/etc in check
    An asian friend humorously remarked today, “Do you think they cookie bookie?”

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  6. subtract the $976M in traffic acquisition costs and the numbers are much more inline with estimates. Hence, why the stock is actually down in the aftermarket (at least I think).

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  7. Thanks for the Sheffield reference.

    As a Boston Red Sox fan, I always nervously watch Sheffield at the plate. Apparently, to my eyes, the man (a NY Yankee) is just full of rage and just tears at every pitch.

    I’ve always thought it would be the worst position in the world to be a 3rd Baseman with Gary Sheffield at the plate. As a right hander, he must send very scary hits to the left side of the diamond.

    But – in line – Google’s $1B USD in profit is also pretty scary. I think these guys are going to end up – over time – being more vilified than Microsoft. “Do no evil” – my ass!

    Does this mean that Google will end up with “Sheffield-Rage”?

    • Chris
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  8. Dear Google,
    Enjoy it while it lasts:
    Pending patent #11/250,908

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  9. This growth is not sustainable.

    Does anyone think they can continue to grow like this ?

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  10. Visible

    I agree, this kind of growth is not sustainable. the law of large numbers eventually kicks in. It is amazing to see that these guys deliver on what they promise, and then some.

    I think the Wall Street doesn’t really know how to get correct estimates out of Google, because that’s just how Google is.

    Regardless, it be interesting to see how 2007 shapes up.

    But when your stock is trading at $400+, even perceived “averageness” is enough to push the stock down.

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