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Google's "Hiring Binge" Causes Shares to Plummet



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    SAN JOSE, CA - FEBRUARY 24: Google co-founder Larry Page looks on during a product launch on February 24, 2010 at the eBay headquarters in San Jose, California. Bloom Energy, a Silicon Valley start up, introduced the "Bloom Box", a solid oxide fuel cell device that can generate electricity at a cost of 8 to 10 cents per kilowatt hour using natural gas. (Photo by Justin Sullivan/Getty Images)

    The stock market's a funny thing. When Google's Chief Financial Officer Patrick Pichette announced 27 percent revenue growth for Google, it should have been a good thing. But because it didn't meet analyst estimates, the stock market bellowed like a wounded animal.

    The stock price profit was only $8.08 instead of $8.12, according to an analyst estimate compiled by Bloomberg. Those four pennies mean a lot, as well as the news that Google would spend its money on new employees, or a "hiring binge," which sent the market into a stock sell-off. (Full disclosure: I own 11 shares of Google.) Google also reported a head count of 26,316 employees, up from 24,400 on Dec. 31, 2010, a rise of 7 percent.

    Google reported revenue of $8.58 billion in the first quarter of 2011, which meant a 27 percent increase from the first quarter of 2010, when revenue was $6.77 billion. And while there was no doubt that Google made money, there was a significant change in operating costs, which jumped 54 percent -- from $1.84 to $2.84 billion, causing some analysts to question Google's vision.

    “You have to ask, ‘Are they going to be spending efficiently or are they going to be wasting money wantonly?’” Colin Gills, an analyst at BGC Partners LP in New York told Bloomberg. "Larry Page has made it clear that he is returning the company to investment mode and he is chasing after big opportunities.”

    The quarterly report actually gave several analysts and others a platform to discuss their concerns about Google -- its hiring push, its growth of mobile technology and the choice of Larry Page as chief executive. The tech giant is unlikely to go away anytime soon, but it can be pushed and pulled by market expectations if its board decides to listen to the market rather than its own company culture. Wall Street didn't create Google so it should have little say in how it should operate.