Google Inc (NASDAQ:GOOGL)’s down almost 1% in pre-market to a price of approximately $536.9, because the company revealed smaller than expected numbers in their financial report for the third quarter 2014. CNBC invited Hudson Square Research analyst Daniel Ernst to talk about Google Inc (NASDAQ:GOOGL)’s perspectives from hindsight. Most of the disappointment was due to a drop in net income of about $160 million, down to $2.81 billion. Then, operating expenses got to be 37% of revenues, from 33% in third quarter 2013, totaling $6.10 billion, compared to $4.58 billion for the previous year’s quarter. However, the company’s still doing pretty well.
“Overall, their core business is up 24%, earnings are up 18% year over year, it generated $6 billion in cash flow from operations. So, this is still a great business, it’s probably right called the best mouse trap in digital advertising. So its 17 times earnings compared to a 35 for Facebook, to 140 for Twitter,” Daniel Ernst.
Analysts believe that Google Inc (NASDAQ:GOOGL) should limit expenses on their attempts to ‘google’ out the next brilliant invention on the basis that:
“There’s difference between understanding the software, and the machine learning, and the information processing going into that and to actually build a car is another thing. But, actually one of the things that they said in the call last night was that most of their growth in operating costs and R&D are actually focused on that core business that generates revenue,” said Daniel Ernst.
Obviously, Google Inc (NASDAQ:GOOGL) would not be that irresponsible with cash wasting it on futile projects or quenching twisted management desires. Besides, it should try and reinvent itself, if necessary, to be able to have some edge over its rivals. As Google Inc (NASDAQ:GOOGL) has little more than $60 billion in cash equivalents, the company should be able to afford some experimentation with completely new products. Nevertheless, markets will continue to punish wasted shareholder money even if that came just as a consequence of misfortune not of mismanagement.
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