Google sees net income nearly triple
Google Inc. has made the blowout quarter commonplace.
The Internet giant Wednesday said that fourth-quarter earnings had nearly tripled from a year earlier and that revenue had jumped 67%.
Still, investors who have grown accustomed to the company’s stratospheric growth sent its stock down 1% in after-hours trading, wiping out its gains earlier in the day. Google rose $7.18 to $501.50 in regular trading before later slipping back to $494.80.
The Web search leader reported net income of $1.03 billion, or $3.29 a share, compared with $372 million, or $1.22, a year earlier. Revenue reached $3.2 billion, up from $1.9 billion.
Excluding one-time items, Google said it would have earned $3.18 a share, far higher than the $2.92 consensus estimate of analysts surveyed by Thomson Financial.
But some analysts attributed much of the profit increase to a favorable tax rate. Analysts differed on the exact effect -- some said Google would have mildly beaten Wall Street’s expectations without the tax benefit, while others said it would have missed estimates.
“We think the stock reaction should be generally neutral given that results were generally in line with investor expectations,” Anthony Noto, a managing director at Goldman Sachs Investment Research, wrote in a report to clients. He has a “buy” rating on the stock.
Google told analysts that it continued to gain share in the search market and that the company improved its formula for matching search queries with targeted ads. Web surfers clicked on 61% more search-related ads than in the same period last year, Google said.
Company executives praised the holiday performance of Google Checkout, the new online purchasing program. It enables customers to pay for purchases through payment information stored with Google, and retailers to promote the service by displaying a shopping cart icon beside their search-related ads.
“We’ve had great adoption by millions of users and thousands of merchants,” said Omid Kordestani, Google’s senior vice president of global sales.
Chief Executive Eric Schmidt said Google had started experimenting with advertising models for YouTube, the video-sharing website it acquired in November for $1.65 billion. He said the YouTube team was working to reduce pirated material on the site and strike licensing deals with media companies for their videos.
Schmidt said the “real value, we’ve found,” is connecting the fans with shows they’re watching online. “That’s attractive to the copyright holder,” he said.
President Larry Page said Google was working to extend its reach not only by expanding into new geographic markets but also by pushing its services out to device providers. The company has struck deals with cellphone carriers and handset makers such as Samsung Electronics Co. and Apple Inc. to enable mobile phone users to do Web searches and get online maps while on the go.
Schmidt said investments in emerging areas such as Web video and mobile search weren’t likely to contribute to the company’s bottom line anytime soon.
“Those are opportunistic for us, not driving revenue for us,” he said.
Analyst Jordan Rohan of RBC Capital Markets said striking content deals would probably cause more variability in profit margins this year. It should take a while, he said, for these products to become moneymakers.
“With the growth trajectory that their core search business is on, it’s hard for new things to really step up and move the needle,” American Technology Research analyst Rob Sanderson said.
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