Shares of Google fell as much as 19 per cent on Tuesday after the Web search company missed Wall Street profit targets for the first time in its short but spectacular history, as disappointing British results led to higher-than-expected taxes.
The slide, which at one stage wiped out more than $20 billion off Google's market value, illustrated the big risks investors have taken by buying the shares after a meteoric rise since their initial public offering in August 2004.
Earnings, excluding one-time items, were $1.54 per share, below the consensus expectation of $1.77.
That ended the uninterrupted winning streak Google has had since its August 2004 public offering, a run in which it topped Wall Street quarterly profit expectations by at least 10 per cent.
The big miss is bound to raise questions about what Google executives knew and when, and whether they failed to release important information to the market in a timely fashion.
Google shares fell 12 per cent in after-hours trade to $379.00, slicing roughly $15.3 billion from a market capitalisation that had stood around $126 billion.
To put that in perspective, the decline represents the entire market value of Gannett, the largest US newspaper chain.
Google had become a Wall Street darling as well as a household word as its Internet services have become synonymous with Web search.
Bullish analysts have predicted the stock price could race to levels last seen during the dot-com era, with one recently predicting the shares could rise to $600.
"It would be fair to say that the bloom is off the rose," said Stifel Nicolaus analyst Scott Devitt, who issued a rare "sell" recommendation on Google stock this month. "Google remains a great company. But there is a disconnect between the business and the market capitalisation."
Japanese, South Korean and Chinese Internet stocks listed in the United States fell 2 per cent to 3 per cent following Google's report.
Chief Financial Officer George Reyes said advertising spending during the month of December had been weak in some sectors of its British business - its second-largest market - due to a fall-off in usage during the year-end holidays