Google Could Catch a Cold From the Economy

SAN FRANCISCO - Google's(GOOG Quote) acknowledgement of a slowing economy is causing investors to wonder whether the tech giant is finally succumbing to it.

Shares for Google continued to slide on Friday, one day after it missed estimates for second-quarter earnings. The stock was down 8.7% to $486.89 in recent trading.

In a rare admission, Chief Executive Eric Schmidt talked about "a more challenging economic environment," something he was reluctant to do in past quarters, which created a sense -- or at least a hope -- that perhaps Google might be immune.

But Douglas Anmuth, an analyst for Lehman Brothers, said the fact that Google invited its chief economist, Hal Varian, to Thursday's conference call for the first time ever "quickly suggested to us that the company is seeing somewhat greater macro effects than three or six months ago."

"Google is not immune to macro impacts and it indicated it is seeing softness in particular categories such as auto financing, home financing, and real estate," he wrote in his most recent research.

Nonetheless, Anmuth maintained that the stock's selloff following Google's second-quarter results has been overdone, adding that "we'd be taking advantage of weakness in the shares into the second half of 2008."

Jeffrey Lindsay, an analyst for Sanford Bernstein, was also reluctant to pile on Google.

"Given the current macro environment, and the fact that the second quarter is typically the weakest from a revenue growth perspective, we thought this was actually a good performance," he wrote in his research.