14 DAY TRIAL // Google has revealed an interesting 'expense' it incurred for the past quarter amounting to $500 million. Even with all of Google's cash and massive revenue, that's no small figure.
The company is saying that it has basically set aside the sum in anticipation of the outcome of an ongoing investigation by the US Department of Justice.
Google isn't saying much, but it explained that it's deducting the sum from the first quarter income to insure that it can settle the matter with the DoJ if it comes to that.
"In May 2011, in connection with a potential resolution of an investigation by the United States Department of Justice into the use of Google advertising by certain advertisers, we accrued $500 million for the three month period ended March 31, 2011," Google said in a regulatory filling.
"Although we cannot predict the ultimate outcome of this matter, we believe it will not have a material adverse effect on our business, consolidated financial position, results of operations, or cash flows," it explained.
Google isn't commenting on the issue at all. The details are scarce, but Google is implying that some advertisers may have abused its ad system and that it may get caught up in the whole thing.
This is a one-time charge and Google doesn't believe the ruling and the expense will have any effect on its long term prospects.
That said, Google has updated its financial details for the first quarter. Net income is now $1.8 billion, down from $2.3 billion as it initially reported.
Income was already below analysts' expectations and the new charge doesn't help. Earnings per share went from $7.04 per diluted share to $5.51 with the charge, a 22 percent drop. This while analysts were expecting earnings per share of $8.11.