Google struggles with mobile, revenue dips in Q3

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Google (NASDAQ:GOOG) failed to meet analyst expectations for the third quarter of 2012, its first with Motorola Mobility fully integrated into its ranks. Much of this could be attributed to Motorola, which had an operating loss of $527 million, a huge increase from the $41 million for the same statistic last year. Overall Motorola revenues were $1.25 billion, with $843 million coming from its mobile segment.

Despite this, Google CEO Larry Page, who made his first public appearance after taking a hiatus due to illness, remained optimistic, stating: "We had a strong quarter. I'm really happy with our business."

Google's $12.5 billion acquisition of Motorola Mobility closed in May, giving Google access to Motorola's 17,000 patents but also its own mobile hardware unit.

Google said it expects more job cuts and higher costs as part of the restructuring of its Motorola Mobility unit, beyond what it detailed in August. In a filing with the U.S. Securities and Exchange Commission earlier this month, Google said that it now expects to "broaden those actions to include additional geographic regions outside of the U.S." Google said in August it would slash around 4,000 jobs Motorola, or 20 percent of the unit's workforce, and said that two-thirds of the cuts are expected to come from Motorola's operations outside the United States.

"Again, at the end of the day, the question for Google is, 'Where do we go from here? Do we stick to Motorola's smartphone, tablet and STB business or sell all these units and keep the IP portfolio?'" noted Infonetics Research analyst Julien Blin. "Keeping the smartphone business is a risky move, as it could further pressure Google's margins, especially given the fierce smartphone environment, dominated by Apple (NASDAQ:AAPL) and Samsung."

Page also revealed that there are presently over half a billion Android-enabled devices in the world, with 1.3 million more devices being activated every day. Of note, Page said that Google's mobile run rate is up $2.5 billion to $8 billion. "That's quite a business," he said. "We have so many opportunities today, that unless we prioritize, we spread ourselves too thin."

Despite this, advertisers were only willing to pay 40 to 50 percent as much for a mobile ad as they were for the desktop counterpart, reported Investors.com in a recent article. This could be, in part, because consumers are less likely to spend as much when shopping via mobile than through the desktop. "I keep saying Facebook isn't the only one that has a mobile issue--Google does, too," said Colin Gillis, an analyst for BCG, in an interview with CNBC

Interestingly, Google's earnings release accidentally leaked to the Web ahead of the earnings call, which the company attributed to human error at R.R. Donnelly.

Separately, Google sent out invitations for an Android event taking place Oct. 29 in New York City. "The playground is open," reads the invitation to the event, which may be used to unveil new Nexus-branded smartphones.

In other Google news, Verizon Wireless's (NYSE:VZ) website reveals a carrier billing initiative in partnership with Google that allows users to purchase up to $25 in digital goods and have the cost tacked on to a user's Verizon bill. In May, carrier Sprint Nextel (NYSE:S) began letting users charge Google Play purchases to their monthly bill.

For more:
- see this SEC filing
- view these earnings slides (PDF)
- read the earnings release
- see this Investors.com article
- read this CNet article
- read this CNBC article
- see this WSJ article (sub. req.)
- see this Bloomberg article

Special Report: Wireless in the third quarter of 2012

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Phil Goldstein contributed to this report.