Monday, March 22, 2010

Google Inc (GOOG) Channel Checks Support Modest Q1 Upside $GOOG March 21, 2010

•We Continue To See Modest Upside To Street Q1 Estimates – Visibility into GOOG’s quarterly results is always limited, but Channel Checks, Datapoints & our Proprietary Analysis give us a greater measure of confidence in our estimates -- $5.07B in Net Revenue vs. the Street at $4.92B and $6.71 in Non-GAAP EPS vs. the Street at $6.55. Directionally, our work suggests a Flat-to-Up Q1 Q/Q Revenue trend for Google vs. the Flat-to-Down Q/Q Revenue trend implied by consensus estimates. Four Specific Q1 Factors:

• 1. SEM Channel Checks Suggest Strengthening In Search Spend – Extensive checks culminating in our 3/19 panel with 5 of the leading SEMs suggest that Q1 Search spend trends have been reasonably positive. One key, multi-vertical SEM(SearchIgnite) is seeing single-digit % Q/Q Spend growth among its client base. Almost uniformly, we see major SEMs increasing their 2010 Spend outlooks. And some of the new Google Search products detailed in our March 4th report are receiving very enthusiastic market response.

• 2. Our Search Revenue Sensitivity Analysis Provides Reasonable Estimates Support – We estimate 12% Y/Y Paid Click and 13.5% Y/Y CPC growth, along with a 1% Q/Q decline in U.S. Segment Revenue and a 6% Q/Q increase in InternationalSegment Revenue. We do expect FX to provide material Q/Q headwinds (approximately $175MM), but our Metrics and Segment Sensitivity Analyses provides reasonable support for our estimates.


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