Earnings Guidance for Google

In: Business and Management

Submitted By tomdagostino
Words 1294
Pages 6
Earnings guidance is a method in which publicly traded companies present their financial forecasts to the general public. These pro forma projections are generally provided on a quarterly basis and are an attempt by the reporting company’s finance team to predict the future growth of the organization. Utilized by public companies to instill confidence in both analysts and investors regarding the company’s future sustainability, these forecasts are usually accompanied by information pertaining to how the company expects to accomplish this feat.
According to a 2009 survey by National Investor Relationship Institute, 84% of the companies who provided earnings guidance, said that they do so in order to “ensure sell-side consensus and market expectations are reasonable (NIRI Member Survey, 2009).” By setting expectations for investors through guidance reporting, reporting companies believe that they are mitigating any potentially negative effects on the company (i.e., a lowering of stock price) due to the possibility of missing target earnings. However, opposing business views believe that offering guidance actually has a negative effect on reporting organizations, causing companies to focus on short-term thinking while neglecting strategic and tactical management decisions that could have a bigger impact on the shareholder’s long-term upside.
Many publicly traded companies, such as Costco, Ford, UPS, Coca-Cola and AT&T, agree with this opposing view of no guidance and have decided not to provide forward earnings. They too assert that it “promotes short-term thinking and does little or nothing to increase the company’s long-term value (Delloite, 2009).”
Google’s management decided to not provide earnings guidance due to myriad reasons, including their commitment of continuing independence of Wall Street. Google believes that remaining independent of Wall…...

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