Google Doubles Its Profit
Google Inc. doubled its quarterly profit and Microsoft Corp. offered an optimistic outlook, restoring some joy to beleaguered technology investors Thursday.
Despite a general slowdown in Web surfing typical of springtime, Google posted net income of $721.1 million, or $2.33 a share, compared with $342.8 million, or $1.19, during the same period last year. Revenue at the Mountain View, Calif., company jumped 77% to $2.5 billion.
The results, which were released after the stock market closed, handily beat Wall Street’s forecasts. Google shares fell $11.88, or 3%, to $387.12 in regular trading, then rose to $390.15 after hours.
“We’re in a seasonally slow period, and they still had very strong growth -- at least for mere mortals,” Guzman & Co. analyst Philip Remek said. “Most other companies would kill for that kind of growth.”
Consider Microsoft, which said profit fell 23.5% in its fiscal fourth quarter as it lost money with its MSN Web division and its Xbox video game console. Yet its shares jumped nearly 6% in extended trading.
That’s because the drop was accompanied by record revenue, largely because of growth in two big businesses: its Windows operating system and software for server computers. Microsoft also issued a strong outlook for the coming year and announced plans to buy back as much as $40 billion in stock from shareholders, a strong show of confidence in its future.
Its shares fell 55 cents, or 2.4%, to $22.85 before the earnings release, then jumped to $24.11 after hours.
“It was a good quarter both on revenue and profit,” said James Ragan, an analyst with Crowell Weedon & Co. in Los Angeles. He noted that Microsoft would have beaten analysts’ expectations if not for a $351-million legal settlement with the European Commission.
Microsoft earned $2.8 billion, or 28 cents a share, compared with $3.7 billion, or 34 cents, in the same quarter a year earlier. Revenue was $11.8 billion, up 16%.
Its Home and Entertainment division saw its loss for the quarter more than double, mostly because of its new Xbox 360 game console. Manufacturers usually lose money selling hardware, but move into the black selling games.
“Early in the life of any gaming console you lose money on the box because you’re building an installed base to sell software,” said Colleen Healy, Microsoft’s general manager for investor relations.
Meanwhile, Intel Corp., the world’s biggest chip company, said it shuffled some top executives to respond more quickly to growing competition. Intel put a rising star in charge of its sales and marketing operations, a direct response to the recent market share gains made by smaller rival Advanced Micro Devices Inc., which reported an eightfold increase in profit Thursday.
Santa Clara, Calif.-based Intel reassigned its co-chiefs of sales and marketing, Eric Kim and Anand Chandrasekher, and replaced them with Sean Maloney, a career sales and marketing executive who is viewed as one of the candidates eventually to become chief executive.
“The moves announced today will help us speed decision-making and bring new resources to bear in critical areas, while allowing me to spend more time on key strategic issues,” Chief Executive Paul Otellini said in a statement.
Intel has lost market share in recent quarters to Sunnyvale, Calif.-based AMD, which is gaining popularity with a versatile microprocessor for server computers and a rejuvenated line of performance and value processors for personal computers.
This week, Intel posted its biggest quarterly profit drop in almost four years, and said revenue fell 13%.
In contrast, AMD on Thursday reported net income of $88.8 million, or 18 cents a share, compared with $11.3 million, or 3 cents, a year earlier. Its shares gained 19 cents to $21.65, then fell to $20.90 after hours on concerns that it was entering a bruising price war with Intel.
Google is fighting a similar battle against Yahoo Inc. for Web surfers. Google’s earnings demonstrated the company’s current edge. Yahoo saw its shares tumble 22% since it reported disappointing earnings Tuesday and said it would delay, to the fourth quarter from the third quarter, a new system that promises to deliver more profitable search-engine ads.
Google said it had made a change of its own to boost profit during the quarter: It began running more ads with commercially oriented search results, and fewer ads on noncommercial results.
Its international business comprised 42% of overall revenue. Ads on Google’s own websites generated $1.4 billion, nearly double the same period last year. Revenue from ads on its partners’ websites jumped 58% to $997 million.
Excluding stock option expenses and other one-time items, Google earned $2.49 a share, trouncing the $2.22 predicted by a consensus of analysts polled by Thomson Financial. Its profit was helped by a favorable tax rate and income from interest.
