Google Earnings Beat Expectations, Stock Gains

 
on January 22 2013 10:35 PM

Revenue from Google's core Internet trade outpaced analysts' expectations during the crucial holiday fourth quarter of 2012, and ad rates fell less than in previous periods, pushing its shares up roughly 5 percent.

Google (NASDAQ:GOOG) announced profits of $8.62 per share Tuesday evening on revenues of $11.34 billion, after subtracting commissions paid to advertising partners, the San Jose Mercury News reported. After excluding one-time charges, the Mountain View, Calif.-based company's earnings per share were $10.65 for the October-December quarter.

According to a Thomson Reuters analysis, Wall Street analysts had been expecting Google to report earnings of $8.48 per share, or $10.52 per share excluding one-time charges, on revenue of $12.36 billion.

Excluding traffic-acquisition costs, the business generated net revenue of $9.83 billion, up from $8.13 billion a year earlier, Google reported. That surpassed a $9.6 billion average forecast from six analysts polled by Reuters.

"Business looked really strong, especially from a profitability perspective. They really grew their margins in the core business," Sameet Sinha, an analyst with B. Riley Caris, told Reuters. "Most of that strength seems to be coming from international markets, which grew revenues quite substantially: up 23 percent year over year, versus the 15 percent growth in the third quarter."

Average cost-per-click, a critical metric that denotes the price advertisers pay Google, declined 6 percent from a year ago, the fifth consecutive quarter of decline but an improvement over the third quarter's 15 percent slide.

Google executives told analysts on a conference call that policy changes related to the quality and quantity of ads appearing on certain of its Web properties had helped shore up click prices while lowering the overall growth rate of paid clicks in the holiday quarter.

"Click prices are still declining, but it's better than expected," BGC Partners analyst Colin Gillis told Reuters.

The decline in Google's click prices is partly a result of consumers' shift to smartphones, where Google's ad rates are lower than those on Google's standard website.

Investors shrugged off another quarterly loss at the Motorola Mobility mobile phone business that Google acquired last year, one of various "big bets" that Google Chief Executive Larry Page has made to better position the company for a changing technology landscape defined by mobile gadgets and social networking.

"We now live in a multi-screen world," Page, said, adding that "we feel naked without our smartphone."

Page said that Google had work to do in "managing our supply better as well as building a great customer experience," but he said that Google remains squarely focused on opportunities based around newfangled devices such as smartphones.

Consolidated net income in the fourth quarter was $2.89 billion or $8.62 per share, compared with $2.71 billion, or $8.22 per share, in the year-ago period when Google had not yet acquired Motorola.

Excluding certain items, Google said it earned $10.65 per share in the fourth quarter.

The company posted consolidated revenue -- which includes its Motorola Mobility mobile phone business but not the television set-top box business it recently agreed to sell -- of $14.42 billion on Tuesday.

Motorola Mobility had an operating loss of $353 million during the quarter.

Google Finance Chief Patrick Pichette warned of more fluctuations in Motorola's financial results in the coming quarters as Google continues to restructure that business.

And he noted that Google was working through 12 months to 18 months of product pipeline that Google inherited in the acquisition.

Google announced plans to sell the Motorola Home television set-top box business to Arris Group Inc for $2.35 billion. The company also said it is focused on developing a smaller lineup of products in the mobile phone business.

Shares of Google rose about 7 percent in Wednesday trading. In the afternoon, they were at $747.30, up $44.43.

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