Google profit rises, but revenue misses some forecasts

Google was among the first technology companies to shake off the recession last year, but the Internet giant's fourth-quarter report could not satisfy investors' increasing demand for stronger growth.

Shares of Google fell about 4 per cent after the leading Internet search provider posted a higher-than-expected profit but its revenue growth lagged some of Wall Street's most bullish expectations - even though it was Google's strongest performance in a year.



Expectations "got higher as they came closer to reporting and they delivered fundamentally sound numbers, but did not deliver a blowout," said Martin Pyykkonen, senior analyst at Janco Partners. "I think the stock will recover. I don't think it will fall through the floor.



Google, whose total revenue increased 17 per cent from a year earlier to $6.67 billion ($4.1 billion), is the latest major tech firm to close out 2009 with improved financial results. Others include Intel Corp, International Business Machines Corp and eBay Inc.



But investors had sold off tech stocks to lock in profits this week, including that of IBM, which has risen roughly 10 per cent in three months.



Google's problems in China have also been an overhang on the stock, which is down about 12 per cent since hitting a 52-week high in early January. The company said last week that it might have to close its China operations after a cyber attack and its decision to stop censoring search results.



Chief Executive Eric Schmidt said in a conference call on Thursday that the China business is unchanged but the company expects to make changes in a "reasonably short time from now."



Google executives said on Thursday that the company would invest heavily in 2010 as it seeks to stay ahead in the search business that delivers the lion's share of its revenue and as it spends on initiatives to expand into new markets.



Google is facing increasing competition from Microsoft, which has struck a deal to provide Yahoo Inc's search technology. And Google's efforts to expand into the mobile phone market, including the recent move to sell the Nexus One smartphone directly to consumers, has put it in greater competition with Apple Inc.



Schmidt said Google's "business structures" with Apple were quite stable, but he declined to comment on media reports that Apple was in talks with Microsoft about replacing Google as the iPhone's search engine.



Schmidt cited mobile as the business outside of search advertising that was most likely to deliver the sharpest growth on a percentage basis going forward, though he said display advertising represented the largest growth opportunity in absolute dollars.



Google's fourth-quarter profit per share, excluding items, was $6.79, above the year-earlier period's $5.10 and beating analysts' average forecast of $6.48, according to Thomson Reuters I/B/E/S.



Net revenue, which excludes the traffic acquisition costs Google paid to partners, rose 13 per cent to $4.95 billion (£3 billion), which was at the low end of some estimates for 13 per cent to 15 per cent growth. The average forecast was $4.92 billion.



"Earnings were much ahead of expectations, but top-line fell slightly below expectations," said Sameet Sinha, analyst at JMP Securities. "I think that is because cost per click was up about 2 per cent sequentially, and we had been expecting closer to 5 per cent growth." Cost per click is the price that advertisers pay Google when a Web surfer clicks on an ad.



Google said its headcount increased to 19,835 employees in the quarter, reversing three quarters of declines. And the company said it spent more money on marketing campaigns during the fourth quarter.



"Spending is always a wild card at Google," said Andy Miedler, senior technology analyst at Edward Jones. But he noted that Google "proved their cost-cutting stripes" during the downturn, and that any uptick in spending going forward will come as revenues rise.



Net income was $1.97 billion (£1.2 billion), or $6.13 a share, in the three months ended 31 December, compared with $382.4 million (£235 million), or $1.21 a share, in the year-earlier period when the company took charges for its investments in AOL Inc and Clearwire Corp.



Total revenue at Google rose 17 per cent to $6.67 billion. Revenue from outside the United States was 53 per cent of the total. Google does not disclose the size of its business in China, where it lags home-grown search powerhouse Baidu, but analysts peg Google's annual China revenue at between $200 million (£123 million) and $600 million (£369 million).



Google shares fell about 4 per cent to $556.26 in after-hours trade following the earnings report.

Suggested Topics
Life and Style
ebookNow available in paperback
ebooks
ebookPart of The Independent’s new eBook series The Great Composers
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Gadgets & Tech

    Guru Careers: Software Engineer / Software Developer

    £40-50K: Guru Careers: We are seeking an experienced Software Engineer / Softw...

    Ashdown Group: Trainee Consultant - Surrey/ South West London

    £22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

    Ashdown Group: Trainee Consultant - Surrey / South West London

    £22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

    Ashdown Group: Recruitment Consultant / Account Manager - Surrey / SW London

    £40000 per annum + realistic targets: Ashdown Group: A thriving recruitment co...

    Day In a Page

    Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

    Fishing is on Nigel Farage's mind

    Ukip leader casts a line to the disaffected
    Who is bombing whom in the Middle East? It's amazing they don't all hit each other

    Who is bombing whom in the Middle East?

    Robert Fisk untangles the countries and factions
    China's influence on fashion: At the top of the game both creatively and commercially

    China's influence on fashion

    At the top of the game both creatively and commercially
    Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

    The man known as GOD has a reputation for getting the job done

    Lord O'Donnell's three principles of rule
    Rainbow shades: It's all bright on the night

    Rainbow shades

    It's all bright on the night
    'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

    Bread from heaven

    Dutch survivors thank RAF for World War II drop that saved millions
    Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

    How 'the Axe' helped Labour

    UK will be 'run for the wealthy and powerful' if Tories retain power
    Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

    The price to be paid for challenging the rule of extremists

    A revolution now 'consuming its own children'
    Welcome to the world of Megagames

    Welcome to the world of Megagames

    300 players take part in Watch the Skies! board game in London
    'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

    Charlotte Gainsbourg on 'Nymphomaniac'

    Starring in one of the most explicit films ever
    Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

    Robert Fisk in Abu Dhabi

    The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
    Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

    Vince Cable exclusive interview

    Charging fees for employment tribunals was 'a very bad move'
    Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

    Iwan Rheon is returning to his Welsh roots

    Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
    Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

    It's time for my close-up

    Meet the man who films great whites for a living
    Increasing numbers of homeless people in America keep their mobile phones on the streets

    Homeless people keep mobile phones

    A homeless person with a smartphone is a common sight in the US. And that's creating a network where the 'hobo' community can share information - and fight stigma - like never before