After the close of trading today, we will get to see earnings out of search and online ad giant Google Inc. (NASDAQ: GOOG).  The company will be competing for earning attention as Microsoft is also reporting after the close.

The estimates out of First Call are $4.74 EPS on $3.87 Billion in revenues.  Google has never given any formal guidance ahead for future earnings but for comparison Wall Street expects Q3 to see $4.99 EPS and $4.09 Billion in revenues and for Fiscal 2008 (Dec.) it expects $20.14 EPS on $16.18 Billion in revenues.

The first item to break-out from the earnings report will be that youhave to back out the traffic acquisition costs ("TAC") and look at thenumbers on an ex-TAC basis.  Last quarter its traffic acquisition costswere $1.49 Billion (29% of total revenues). 

We also will be watching the company’s employee headcount since WallStreet has spent so much time figuring out the company’s employeegrowth versus revenue growth.  At March 31, Google had full-time 19,156employees globally, with 2,351 employees added in Q1 (but it notedabout 1,500 were from DoubleClick).  We would note that Google said itlaid off 10% of those associated with DoubleClick in April after thatMarch 31 cut-off date.

The exact movements of the stock expectations will vary, but this islooking more like the new Google over the old Google.  We have seennearly a $13 range in the stock from high to low today and seen morethan a $50 stock swing from highs to lows in the last six tradingsessions.

Earnings estimates at Google have actually moved up slightly since lastquarter, yet some are fearing the revenue number.  Whether or not thatis true, we’ll wait until after 4:00 PM EST today.   Analysts have anaverage price target on Google of over $650.00, showing an upside ofmore than 22% from today’s share price.  Options traders appear to bebracing for a move of up to almost $20.00 in either direction today,but we’d note that this would not put the stock at 6-day highs nor lowsif that came to pass.

There are so many other variables to today’s earnings.  ValueClick just sounded off a very cautious second half of 2008on online ad spending.  Its deal with Yahoo! is still a sidebar effortas to what the financial terms will be or if it merely meant to be athorn in the side of Microsoft.  We have the DoubleClick integrationstill under way, we have the recent Android launch, the data center andhardware spending expansions, and many other issues to digest.

The one thing you can count on if history is any measure is that therewill critics and fans alike tomorrow morning, regardless of what thenumbers show.  Its 52-week trading range is $412.11 to $747.24.

Jon C. Ogg
July 17, 2008

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