2nd UPDATE: In Premature Report, Google Says 3rd-Quarter Profit Tumbles

--Google says net income shrank 20% in latest quarter

--Google shares fell 9% before trading was halted after premature release of earning report

--Financial printer R.R. Donnelley says company is probing the incident

(Adds R.R. Donnelley comment in sixth paragraph.)

 
   By John Letzing and Ben Fox Rubin 
 

Google Inc. (GOOG) is finding it tough to juggle a massive acquisition and tumbling prices for ads in its dominant search engine.

The Mountain View, Calif., company is also apparently finding it difficult to properly time the release of its quarterly earnings reports.

Google blindsided investors Thursday by releasing a downbeat third-quarter report in the middle of the day--hours earlier than anticipated--and before the market had safely closed.

The result: Google shares tumbled about 9% before trading was halted.

In a statement, Google said its financial printer R.R. Donnelley & Sons Co. (RRD) filed the quarterly results without authorization.

An R.R. Donnelley spokesman said in a statement that the company is "fully engaged in an investigation to determine how this event took place."

In its premature report, Google said net income shrank 20% in the quarter. Its results were weighed down by factors including an operating loss of $527 million at recently acquired Motorola Mobility.

Thanks in part to the Motorola acquisition, headcount ballooned to more than 53,500, with about 17,500 of those working for Motorola.

While use of Google's search engine grew, the prices it commanded for search advertisements declined.

Google said its rate of paid clicks, or the number of times users clicked on search ads, rose 33% compared with the period last year. Meanwhile, the prices paid for those clicks declined 15%.

Google generally pulls in less revenue from advertising placed on mobile devices than those on personal computers. As more people use Google on phones, that has created a downward trend for overall ad prices.

Google's stock had hit new highs in recent months, as concerns about the Motorola acquisition faded. The shares are still up more than 6% in the year to date.

Google closed its $12.5 billion purchase of cellphone maker Motorola in May, in a bid to expand its influence over the hardware market.

In August, Google said it would reduce Motorola workforce by about 20%.

Overall, Google said Thursday its third-quarter profit was $2.18 billion, or $6.53 a share, down from $2.73 billion, or $8.33 a share, a year earlier.

Excluding stock-based compensation and other items, profit fell to $9.03 a share. Net revenue came in at $11.33 billion.

Analysts surveyed by Thomson Reuters had expected earnings of $10.65 a share and net revenue of $11.86 billion.

Operating expenses jumped to $4.8 billion, Google said, from $3.3 billion in the year-ago period.

Motorola contributed $2.58 billion in revenue in the latest period. The unit's operating loss was $527 million.

Write to John Letzing at [e-mail] and Ben Fox Rubin at [e-mail]