

Google 3Q Profit Soars 46 Percent - gibsonf1
http://biz.yahoo.com/ap/071018/earns_google.html

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ivankirigin
Profit measured in dollars, with revenue coming in across the world means part
of this isn't real growth.

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Xichekolas
The profit is up 46% year over year... The Euro has risen about 18% against
the dollar in the same period. Even assuming that ALL of their business was in
Euros (which it isn't by far), this still represents pretty darn good growth
for a company that already had the market cornered.

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nostrademons
Profit is more heavily leveraged than revenue.

Let's do a hypothetical example. Assume that you've got a company that does
$100M in revenue, 30% of which comes from Europe (so $70M from US, $30M from
Europe). They spend $90M to get that revenue, all in USD, for margins of 10%
and earnings of $10M.

Now say that the Euro appreciates 20% against the dollar. That $30M in Euros
becomes worth $36M. Total revenue goes up to $106M, but expenses stay constant
at $90M. Profit is up to $16M, a 60% increase. However, the operation of the
business hasn't changed at all - it's _all_ due to currency fluctuations.

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byrneseyeview
But revenues are up 57% year-over-year. So if forex played a part, it had to
be negative -- if they have disproportionate oversease expenditures compared
to revenues, that would make sense. Otherwise, blaming the dollar doesn't
help.

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Xichekolas
Well I'm sure that forex had a slight positive effect. My point was that it
wasn't the _only_ cause of the increased profits. The fact that revenues are
up 57% and profit is only up 46% _with the slight forex leverage_ probably
signals that they are getting big enough that their margins are falling off. I
would guess that is why it is only up 1.2% (as of close of market) on such a
huge increase. The other reason probably has to do with the generally bad day
on the market today.

Of course, seeing it around $650 makes me wish I hadn't sold all mine at $425.
;)

