When Google reports its fourth quarter numbers after the bell tonight, it's not going to be a question of whether the company beats the Street, but by how much, according to the myriad analysts I've been talking to.
That's how sure they are that this company's earnings are in overdrive.
Officially, the consensus is $6.48 a share on $4.9 billion in net revenue (excluding traffic acquisition costs). I say "officially" because I really can't find anyone below that number, and if it's the "average," I'm not sure how we got there. That $6.48 EPS number, by the way, was a nickel lower just two days ago, so we're already seeing these numbers begin a steady creep north ahead of the report tonight. And just yesterday, FBR raised its fourth quarter EPS estimates to $6.65 from $6.38, and its revenue estimate jumped to $4.928 billion from $4.683 billion. Over at WhisperNumber.com, the EPS number is $6.54, and it bears reporting here that Google has beaten the whisper in 16 quarters, and missed the whisper in 5 quarters.
Other key metrics to follow: Google Sites should generate $4.45 billion; Networks $1.97 billion; Licensing revenue should reach $208 million; Paid Clicks should have risen 13 percent year over year. Citi's Mark Mahaney is looking for $6.33 and $4.84 billion in net revenue. Paid Click growth should grow 13 percent; Web Sites $4.39 billion; Network Sites $1.98 billion; North American revenue growth 7 percent quarter to quarter; International 14 percent; and Capex of around $525 million.
Like eBay yesterday, Google stands to benefit broadly from the influx of online consumer spending during the fourth quarter. Fact is, Google has been able to thrive in a soft economy because companies looking for a little extra bang for their advertising buck turned to the online leader and saw a nice return. Now that the economy is improving, those same advertisers are likely to spend even more, now that they see how strategically compelling the Google platform can be, and because they now have more money to spend. And with no real competition out there, and Google only extending the chasm between itself and one-time rival Yahoo, the company is sitting pretty.
But that's all search centric.
There are obviously some other key issues facing Google during this earnings season that cut right to the core of where this company goes from here. Google has had such difficulty trying to come up with meaningful revenue streams outside of search, and just when you think they might have something, something else comes along that torpedoes it. Case in point: The mobile operating system Android is now on handsets offered by all the major wireless carriers, including AT&T, Verizon, Sprint, T-Mobile. But the company's efforts to launch its own branded handset, essentially a hopped up HTC smart phone already out in the market, seem to be floundering. Sales seem soft, there doesn't seem to be a lot of traction in the marketplace, and the headlines about lousy customer support on its new online smart phone shopping destination drown out any good news that might be there.
Google long ago suggested China was a key market for the company and yet it's never really been able to unseat Baidu, or gain any meaningful traction there.
Now, a hacking controversythat has turned into a political and diplomatic shouting match between the Chinese and Google threatens the company's entire operation there. Just this week, Google announced plans to delay offering its two handsets that were scheduled for release in China. And does the tension between Google and China threaten Motorola's Android handset offerings in that country? And by default, does that become good news for Apple, which began selling its iPhone there late last year, but has not enjoyed much success there yet?
And speaking of Apple, and tension, Google has kissed its once rosy relationship with Apple goodbye. It might have seemed bad enough that long-time Steve Jobs ally Eric Schmidt was forced from Apple's board as the two companies transformed into staunch rivals from partners. Now there's word that it's gotten so bad that Apple is talking with Microsoftso that Bing displaces Google as the default search engine on iPhone, and probably the tablet Mac Apple is scheduled to unveil next week. Google has already declared that the world is going mobile and that it is absolutely key for Google to become the major search and advertising player there (look no further than the enormous premium Google paid for AdMob, along those lines). For Apple to look elsewhere, let alone to Microsoft, for a mobile search deal on iPhone is the tech world's version of throwing a shoe at former President George Bush. What an insult!
Meantime, despite those cross currents, search advertising continues to perform for Google. Plans to offer a new movie rental business over YouTube with the upcoming Sundance Film Festival show promise, and could someday offer a threat to NetFlix, though not any time in the near future. It's true that Google still relies on a single revenue stream for its success, but wow, what a single revenue stream it's been, and continues to be. And you gotta give the company an "A" for effort when it comes to searching for new ways to make money. But another successful stream, despite all that effort, continues to elude this company.
It may not matter.
Tonight's numbers should be impressive, and like IBM and Intel before it, there's probably no better company to take advantage of the economic turnaround that's already afoot, and after today, those targets at $640 and above might seem quaint.
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