Google Earnings: Calm Before the Storm

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Google is all but certain to deliver pretty good news when it announces results this afternoon. Unfortunately, for the online giant, this is one of those quarters where a downside surprise would matter a lot more than an upside surprise.

Let me explain. Last quarter was a rare miss for Google , so analysts are buzzing about how Google never misses twice in a row. (Which means if Google were to somehow miss twice in a row, Wall Street would freak out.) Consensus calls for $8.1 billion in revenue and $9.65 in earnings per share.

Mainly, we'll be scrutinizing Google's cost-per-click trends, which took a dive last quarter. Google management shrugged it off, saying the blame fell on foreign exchange rates, and the combined impact of a bunch of tweaks they made to ad formats. Okay — but if cost per click doesn't see any kind of a rebound, analysts will ask plenty of questions about what it means for Google's results long-term.

A couple of the analysts who expect an earnings beat think the upside comes, at least in part, from a modest improvement in cost per click.

But really? The bottom line is this is a first quarter, worth a couple billion less in revenue than the seasonally strong holiday quarter was. Even if it's a pretty good quarter, the impact will be limited.

What does matter is what's coming. And the biggest thing coming down the pike for Google is the closing of its Motorola Mobility acquisition. When the deal was announced last summer, the company said it should close in late 2011 or early 2012. That means it should close in the next two months, pending regulatory approvals in China and Taiwan.

Most acquisitions fail, so the fair way to look at this is as a potential train wreck.

Here's a look at the oncoming train: Motorola Mobility had revenue of $13.1 billion in 2011, and a net loss of $249 million. Fewer than half of the 42 million phones Motorola sold in 2011 were even smartphones — which suggests there's a big, expensive chunk of Motorola's business that Google should probably sell or shutter immediately.

Whether Google will actually do that — and what it will do with Motorola's mildly profitable but stalling set top box business ($226 million operating profit on $3.5 million in 2011) — is a big, big issue. And we're not going to get answers today, because Google doesn't technically own it yet.

Put it all together, and it's hard to get too worked up about Google's results today, good or bad.