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JPMorgan Analyst Lowers Google Earnings Estimates

Wednesday, 07 Jul 2010 02:46 PM

A JPMorgan analyst reduced his estimates for Google Inc.'s second-quarter results Wednesday, citing changes in foreign exchange rates and the elimination of Nexus phone sales.

Google had opened an online store to sell its Nexus One phone, which debuted in January, directly to consumers, but people didn't like the idea of buying a phone without hands-on experience first. Google said in May it will close the store and rely on traditional retailers instead.

Analyst Imran Khan, who rates Google "Overweight," lowered his second-quarter earnings estimates to $6.38 per share on revenue of $4.92 billion from earnings of $6.61 per share on revenue of $5.07 billion. He also cut his target price to $566 from $639.

He estimates that as a result of the closing of the online store, Google's second-quarter domestic gross revenue will be about $30 million lower than it was in the first quarter. At the same time, he expects domestic revenue excluding the phones to grow 2.3 percent sequentially. Overall, he expects domestic gross revenue of $3.24 billion, down from his prior estimate of $3.38 billion.

The weakening euro and pound will also likely cut into international revenue, the analyst added.

Google's shares rose $5.59 to $441.66 in midday trading. The stock is down more than 28 percent year-to-date.

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