Google slumps after finance chief warns on revenue growth

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Shares in Google, the world's No 1 search engine company, tumbled yesterday after the California-based company's chief financial officer told an advertising conference in New York that he saw problems in maintaining revenue growth rates.

The remarks, seen by some on Wall Street as a warning against exaggerated expectations for the company, triggered new jitters among investors, with shares in Google sliding by as much as 14 per cent after the markets opened. They regained some ground to end down 7 per cent at $362.62.

The company's stock has been hit twice in recent weeks: first by lower-than-expected results for the last quarter of last year, in part because of higher tax rates, and then by a surprisingly bearish analysis of its prospects in the financial magazine Barron's last month.

Speaking at the conference organised by Merrill Lynch, Google's CFO George Reyes indicated that the company, which has a 46 per cent share of the search engine market, may have done almost all it can to maximise growth. For now, growth must be largely organic, he said.

"We're getting to the point where the law of large numbers starts to take root," he said. "Growth will slow. Will it be precipitous? I doubt it. I am not turning bearish at all. I think we have a lot of growth ahead of us. It's a question of what rates."

Google's slide infected other tech stocks in New York and contributed to downward momentum in all the main markets. Larry Peruzzi, a senior equity trader at The Boston Company Asset Management, said: "Google is taking a shaky market down. It's the other shoe to drop. This is kind of new territory for them being this cautious."

Ben Hunt, an analyst with Iridian Asset Management, said Mr Reyes introduced doubts at the last minute after an otherwise upbeat speech. "I thought his comments were bullish until, at the very end, he said that because of the law of large numbers, there are going to be challenges to their revenue growth rate," he said.

The carnage was not as great as on 1 February, when the company's last-quarter earnings report first signalled bumps ahead. That report unleashed a 19 per cent drop in Google stocks, wiping out about $16bn from the wealth of shareholders.

Indeed, a cooling of Google could continue to exert a downward pressure on the markets. By mid-January, its stock price had more than quadruped since the company's IPO in 2004 to reach an intra-day peak above $475. Since then, a quarter of that value has been wiped away.

The company derives its earnings from advertisements that appear on its sites as web users conduct their searches.