July 24, 2006 4:00 AM PDT

Google makes nice with Wall Street

When Google announced strong earnings last week, executives reached out to analysts in a way that, while not exactly revealing the inner workings of the company, at least showed a thawing of the search giant's often icy relationship with Wall Street.

After the traditional conference call with analysts on Thursday to discuss Google's second-quarter results, which beat Wall Street estimates, co-founder Sergey Brin participated in some of the one-on-one calls with analysts, something he'd never done before, a Google representative said.

Though that may sound like common practice for many companies, Google watchers say it's a big change from two years ago when the search king was casting itself as the reluctant darling of investors, snubbing a conventional IPO and declining to discuss its operations.

The company, they say, may finally be learning to play nice with the Wall Street analysts whose enthusiasm for Google has helped turn it into a $118 billion tech powerhouse.

"It is not as if they are spilling the family secrets today. It's just that it doesn't feel, perhaps, as combative as it once was--not by a long shot," said Derek Brown of Pacific Growth Equities. "Yesterday, you came away from the (earnings) call feeling like they offered a bit more insight into the business than perhaps you may have two years ago."

Google went public in August 2004, using an unusual, open-auction method of selling shares instead of the typical approach of letting institutional investors set the price and allocate shares. That, and Google's unapologetic stance toward Wall Street traditionalists, irked more than a few.

"Google's communication process was somewhat broken after the IPO, and they've fixed it," said Jordan Rohan, an analyst at RBC Capital Markets. "It's not the best in class, but over time they will continue to improve it. You could say their new communication plan is still in beta, maybe for some time."

Google investor relations director Kim Jabal acknowledged that the company's reticence in its early years as a public entity may have contributed to a reputation on Wall Street for being "arrogant."

"In the early days, the company was laser-focused on keeping the train on the track...keeping up with hyper-growth and running the business. We didn't spend a lot of time talking to investors," Jabal said. "As we grow, we are working on ways to carve out more time and attention for our investors, analysts and shareholders."

"The challenge," Jabal added, "is that investors and analysts want metrics that we don't feel comfortable sharing, for competitive reasons. We hope to be more transparent regarding our business model and strategies to help investors better understand the story."

Google executives have been trying to be more communicative with investors, analysts, the press, partners and governments, said spokesman Jon Murchinson. But at the same time, the company must find a balance between disclosure and spilling the beans to competitors, he added. The company has taken several concrete steps.

• Google recently hired Market Street Partners, an investment community consulting firm, to help it communicate with those in the Wall Street milieu, said Murchinson. The firm has been calling financial analysts and surveying them as to what they feel are the more important issues pertaining to the company.

• Executives are making more presentations at financial conferences, instead of limiting appearances to just one conference per quarter, analysts said.

• Google is disclosing more in its quarterly filings with the U.S. Securities and Exchange Commission, said Rohan. "They have started to break down capital expenditures by type and offer a breakout of how fast international markets are growing," he said. "That helps put the picture together."

CONTINUED: "Unprecedented" openness?…
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This could be very bad news
One wonders how long before Google joins countless other tech firms whose "strategic vision" looks no further than this coming Friday's "earnings guidance".
Posted by Too Old For IT (351 comments )
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