Google CFO warns of slow growth

Google's Chief Financial Officer George Reyes sparked more than a 10 per cent sell-off in the Web search leader's volatile stock after he cautioned that online advertising revenue growth could slow.

Speaking at a Merrill Lynch internet advertising conference here, Reyes said the company's Web search advertising business, which generates 99 per cent of its revenue, would depend on overall market growth rather than specific improvements Google makes that can result in greater sales.

"Growth is slowing and now largely organic," the Google CFO was quoted by CNBC financial television as saying. "The search monetisation gains have now been largely realised."

Organic factors refer to increases in the number of search queries for future growth as the benefits of tweaking its Web search advertising system by placing more ads on each page and other such efforts have increasingly been realised.

Google shares dropped more than US$50 ($76.72) in heavy trading before recovering slightly to US$357.37, down US$33, or 8.5 per cent on Nasdaq. This spurred wide selling in the 45-component American Stock Exchange internet Index, which lost 3.5 per cent.

Contrary to common Wall Street practice, the Mountain View, California-based company has a policy of not commenting on its financial targets, exacerbating Tuesday's sharp reaction.

The Google finance executive said he believed "a lot" of growth lay ahead, but that the rate of growth was in question, according to a Dow Jones report. "I'm not turning bearish at all," the story quoted Reyes as adding.

Ben Hunt, a buyside analyst with Iridian Asset Management LLC, who watched the Google presentation, said Reyes introduced doubts at the last minute after an otherwise upbeat speech.

"I thought his comments were bullish until, at the very end, he said that because of the law of large numbers, there is going to be challenges to their revenue growth rate.

Shares of Chinese Web search company Baidu fell 5.3 per cent to US$51.45, online auction company eBay lost 3.6 per cent to US$39.80 and Yahoo Inc, fell 79 cents, or 2.4 per cent, to US$31.95.

Tim Biggam, chief options strategist at Man Securities, a Chicago-based broker, said, "Any time you get a stock valuation based on future growth prospects, and those growth prospects as in the case with Google are tempered, you are going to see this sort of negative reaction in the marketplace."

Reyes comments, which came two days ahead of the company's highly anticipated annual analyst meeting, were Webcast.

- REUTERS