Tickers in this Article: GOOG, EBAY, YHOO, AOL, BIDU
The market gave a resoundingly negative reception to Google's (Nasdaq:GOOG) latest earnings report, driving the stock down more than 8%. The market reacted to a number of things from Google, including increased spending, potential inroads from rivals, as well as a disconcerting conference call performance by its CEO.

TUTORIAL: Fundamental Analysis

Concerns Surface
None of these concerns on the Street alone necessarily made for the takedown of Google stock, but in the aggregate, it was enough to drop the share price nearly 48 points to $530 and some change. What jumped out in the first quarter's earnings report was a sharp 54% rise in operating expenses, from $1.84 billion to $2.84 billion.

Other Quarterly Numbers
Revenues with traffic acquisition costs (TAC) deducted grew to $6.54 billion from $5.06 billion in the same period last year. Non-GAAP net income, which measures core business performance for Google, grew to $2.64 billion or $8.08 per share, from $2.18 billion or $6.76 a share in the first quarter last year. The Street read the operating expenses costs as holding back better growth on the bottom line, so the market lashed at the stock. Despite the market reaction, Google's results are still impressive.

A Changing View
Google increased its head count to 26,316 employees by the end of the quarter, a 7.9% increase since the end of its fourth quarter last year. The company is ramping up its hiring in part to combat Facebook in the social networking arena. It also has a number of other initiatives such as its continuing development in mobile, with its Android operating system.

Google insists its spending is to foster long-term growth. What the Street sees, however, is a too ready willingness to spend, which erodes profit and adds to skepticism about Google growing as it has, with its always outsized growth rates. The unstated wonder is if Google's going to become a more ordinary company, like an eBay (Nasdaq:EBAY), Yahoo! (Nasdaq:YHOO) or even worse, irrelevant like an AOL (NYSE:AOL).

Page Puzzles
The performance by once-again CEO, co-founder Larry Page, is also an issue. With his bizarre, disconnected comments that lasted less than three minutes during the conference call, Page managed to fan the fears observers already held. (To learn more about conference calls, see Conference Call Basics.)

Page not only failed to reassure about the spending and the growth, he instead made listeners more nervous about his ultimate ability to lead the $170 billion company as expertly as his predecessor, Eric Schmidt.

Google Still Good
Investors have to balance the long-term and larger picture of Google's operations performance with these legitimate concerns. There are other, older concerns that come to the fore when a quarter is deemed subpar, such as this one was by the Street. Google's exit from China which left it to Baidu (Nasdaq:BIDU) is one. While Google still dominates search, the question looms whether search will continue to dominate Google. The company continues to develop its newer businesses such as mobile and display, and is committed to more of this. It isn't likely though that YouTube and Android can satisfy the Street's appetite for fast enough growth. Yet Google is still a formidable company, though not the young growth phenom it once was.

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