“Creative accounting” invented by Woldcom and Enron help GOOGLE to save the day for insider selling until next quarter results. They have hided horrible truth that income from operations actually fell from 4q 2005 by 35%! From 659.6 mil to 487.7 mil.
In 4q 2005 “Income from operations” was 569.6 mil, they have expensed ALL related to the 4q 58.2 mil of stock-based compensation. They just mentioned that: “…SB compensation was 58 mil related to 46 mil in 3rd q…” “…SB comp will significantly higher in 2006…” Their accounting policy was in line with GAAP! All related expenses were accounted in the RELEVANT q. One of the most important GAAP principles is that “…approved accounting polices must be in line with GAAP rules and consistent within reported periods in order to give reliable and clear picture of the underlining business conditions for its creditors and shareholders…” If we will add NON business expense of 90 mil given to GOOG foundation “Income from business operations” was in 3rd q 2005 actually at 659.6 mil!
In 1st q 2006 “Income from operations” was 742.7 mil, but in contradiction to their own accounting policy they have accounted only 115 mil of stock-based compensation and transferred 255 mil reaming charges RELEVANT and Accrued in 1st q into the future periods in violations of GAAP principles. By this action they are giving misguiding information and concealing the fact that actual “Income from operations” GAAP is only 742.7 mil minus 255 mil at 487.7 mil which is representing decline in q/q “Income from business operations” of 26%!
Actual GAAP EPS in 1st q 2006 was only 1.11 compare to 1.52 (after we add non business foundation) in 4th q 2005 an astounding decline of 27%!
Now we can understand what CFO was talking about, it was apparent to him that they can never make proper GAAP numbers without crashing the stock. How could they put even their reputation on line for this scam? Money maybe, they are still selling like there is no tomorrow. Even their own numbers after proper repositioning are showing decline in margin, income from operations and actual earnings, I think they were caught by surprise how easily they can deceive retail guys with Media hyping “incredible results” they are really incredible check all figures in filings.
They have mentioned Buffet few times; I think that if we can imaging that he could be involved in such business management of this company would go to jail.
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