Google CEO Larry Page’s relationship with Wall Street is getting off to a rough start, and the company's stock is taking a hit as a result.
On Thursday, Google announced its first quarterly earnings: Revenues rose by 27 percent, but earnings per share came in at $8.08, which were slightly lower than the expected $8.11. The most surprising number was the 34 percent increase in expenses which came as a result of last year’s across-the-board salary hike and the large retention packages given to employees to keep them from leaving to work for rivals like Facebook and Twitter. (Google reportedly offered two key product employees a combined $150 million in stock grants to keep them from defecting to Twitter.)
It wasn’t just Google's less-stellar-than-usual earnings that bothered Wall Street—it was Page’s response. In Google’s post-earnings conference call, Page offered a few short, scripted statements about his optimism for Google’s future, and then quickly handed the phone off, failing to address Google’s performance or expenses increase, and refusing to answer questions. While Page has always been press shy and has made it clear that he intends to focus on Google’s long-term plans rather than short-term results, this latest act has investors feeling snubbed and fearing for Google’s future. Citi analyst Mark Mahaney, who spoke with Reuters, cited the "token appearance" by Page as being among the negative points from the company's quarter.
Investors' unease regarding Page was swiftly reflected in the stock market. Following Thursday’s call, Google’s stock took a nosedive, closing on Friday at $530—almost $50 below its close the previous day—and wiping out $15 billion in value. The drop set a record for Google’s biggest single-day decline since December 2008. In mid-morning trading today, the stock was down another 10 percent, below $520.
The decrease should make Google even more worried about losing its top employees to the competition. According to TechCrunch’s Erick Schonfeld, as long as Google’s earnings and stock keep rising, it doesn’t matter how well Page gets along with investors, but “if the stock keeps going down instead, then all of a sudden it does matter how Page treats Wall Street. Talent is attracted to rising stocks, and Google needs as much talent as it can lay its hands on to go after social, local, mobile, and other new markets.”