Google delivers good and bad earnings news to Wall Street
At a time when the economic gloom is casting a long shadow over the technology sector, Google offered a silver lining: The Web search market stayed strong in the fourth quarter, helping the company post better-than-expected earnings.
Though Google's operating profit was up sharply, the Internet giant posted its first-ever decline in net profit. Blame bad investments and legal settlements: In its earnings report, Google said it had to write down its stakes in Time Warner's AOL unit and Clearwire, the struggling wireless Internet service provider. It also took a hit for the legal settlement with book publishers that Google announced in October.
CEO Eric Schmidt today acknowledged an "increasingly difficult economic environment." He said the Internet giant continued to hold its own while keeping a tight lid on costs.
"Now it's clear we are in a worldwide recession," Schmidt told analysts during a conference call. "We don't know how long this period will last. But we are prepared to get through this, no problem."
The Mountain View, Calif., company said fourth-quarter revenue jumped 18% to $5.7 billion, up from $4.83 billion in the year-ago quarter. Excluding commissions paid to advertising partners, Google had sales of $4.22 billion, higher than the $4.2 billion analysts had estimated.
Google reported fourth-quarter net income of $382 million, down 68% from $1.2 billion a year ago. Excluding certain charges, such as the cost of employee stock options, the company earned $5.10 a share, better than Wall Street's estimate of $4.95 a share.
Google also announced a voluntary one-for-one stock option exchange to retain the 85% of its employees whose options are underwater -- meaning their strike price is higher than Google's trading price.
Google's profit growth has slowed in part because of the dour U.S. economy. It still dominates search advertising and rivals such as Yahoo. Google's stock has dropped 25% during the most recent quarter.
-- Jessica Guynn
Photo Credit: Paul Sakuma / Associated Press