Google’s profit misses some estimates; shares decline

Bloomberg News

Google Inc. reported first-quarter profit that fell short of some analysts’ estimates as ad sales didn’t grow enough to satisfy investors. The shares fell in late trading.

Net income rose 37 percent to $1.96 billion, or $6.06 a share, from $1.42 billion, or $4.49, a year earlier, the company said Thursday. Leaving out costs such as stock-based compensation, profit was $6.76 a share. Estimates compiled by Bloomberg were as high as $6.91.

Google, grappling with rising competition from companies such as Microsoft Corp., is ramping up investments to buoy its competitive edge. The company, which announced six acquisitions this year, may not be adhering to the same financial discipline it had during the financial crisis, said Colin Gillis, an analyst at BGC Financial in New York.

“Their focus has scattered out a bit,” said Gillis. “They are spending more.”

Excluding revenue passed on to partner sites, sales of $5.06 billion compared with the average $4.95 billion prediction. Estimates ranged as high as $5.12 billion.

Google, based in Mountain View, Calif., fell 3% in after-hours trading to $577.65. It had climbed $6.30 to $595.30 at the close of regular trading.

While Google has maintained its lead in search, its share declined to 65.1 percent in March from 65.5 percent a month earlier, according to ComScore Inc. That’s the biggest one-month decline since January of last year.

Microsoft, benefiting from its new Bing search engine, had 11.7 percent share, up from 11.5 percent. Yahoo Inc. reversed six months of declines and posted a market share of 16.9 percent, up from 16.8 percent. The two companies signed a 10-year search agreement last year to compete with Google.

Google could face regulatory challenges with its planned acquisition of mobile-ad company AdMob for $750 million. U.S. regulators vetting the deal have sought sworn declarations from Google competitors and advertisers, indicating the government may challenge the deal, people with direct knowledge of the matter said last month.

Still, the company will be challenged to grow in China -- the world’s largest Internet market. Last month, Google shuttered its mainland China search site and redirected users to its Hong Kong site. The decision was made after the company’s systems endured cyber attacks. Google competes with Baidu Inc. in China.