Google Sneezes, Wall Street Catches Cold

02 March 2006

Google finance chief George Reyes spooked Wall Street after stating the blindingly obvious - that the online search giant may not maintain its hitherto exponential growth.

Reyes' remarks, at an investor conference in New York, sent the company's stock plunging by up to 13%. Investors saw his comments as an acknowledgment of the long-held view that Google is too reliant on a single revenue source: search-related ads.

Reyes told the meeting: "Growth is slowing and now largely organic; the search monetisation gains have now largely been realised."

He added: "At the end of the day, growth will slow. Will it be precipitous? I doubt it... I'm not turning bearish at all. I think we've got a lot of growth ahead of us...the question what rates?"

Analysts were disappointed by Google's 97% year-on-year sales growth last quarter, compared with 109% in the previous three months.

The search titan's 'do no evil' image suffered recently as it faced questions from the US Congress about acquiescing to censorship in China [WAMN: 17-Feb-06]. It has also received subpoenas from the US Justice Department to reveal how much personal information it keeps on individuals.There are problems too with its new Google Video product.

Comments Sasa Zorovic, analyst with Oppenheimer & Co: "It came off its pedestal last quarter. Google is mortal just like the rest of us."

Data sourced from Financial Times online; additional content by WARC staff