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Google profit increases 26%

17 октября 2008

Google Inc. posted a 26% profit increase and a 31% revenue jump for the third quarter, as the Internet giant showed some resilience amid the souring economy and executives reined in spending.

Google's battered shares surged more than 8% after hours as the results weren't as bad as some had feared. But the report also highlighted how the company is maturing: growth decelerated from the second quarter when profit rose 35% and revenue climbed 39%.

Analysts had recently revised down their expectations for Google over concerns that turmoil in the global economy would crimp the company's growth. The concerns knocked 20% off Google's share price in the past month, leaving stock options for many Google employees underwater.

But Google's business held up, and the company said the growth rate at which people click on its ads stayed relatively steady from the second quarter at 18%.
The company's shares rose 8.6% in after-hours trading to $383.51. At 4 p.m. on the Nasdaq Stock Market, the stock closed at $353.02, up $13.85, less than half its record $741.79 reached late last year.

On a call with analysts, Google Chief Executive Eric Schmidt described the current global economic situation as "uncharted territory." He expressed confidence that Google could respond by keeping "a very close eye on costs."

Google slowed its hiring and spending during the quarter. It added only 519 full-time employees, compared with
2,130 in the same period a year ago. The company's capital expenditures dropped 18% during the quarter from a year earlier to $452 million. The majority of the money went toward data centers, computer servers, and other infrastructure.

In an interview, Mr. Schmidt noted that Google has been keeping close watch on expenses for several quarters and that "there is a lot more that we could do" if necessary. He said the "the bar is a little higher" for acquisitions.

Mark May, an analyst at Needham & Co., said Google's revenue growth was a pleasant surprise given the gloom in the economy. But "the biggest surprise was how much expenses came down," he said, noting that the relatively low number of new hires came during what is typically a big hiring quarter, coinciding with the end of summer.

Mr. Schmidt also highlighted plans to invest in areas such as online software for businesses and display advertising, the large ads that appear along Web pages.

Mr. Schmidt said he believes the rocky economy could also spur adoption of some of Google's lesser-known services, such as its online word-processing and spreadsheet software, which it believes is more cost-effective than offerings from rivals.

Google needs to make a mark in new areas as growth in the online-advertising market is poised to decelerate, analysts said.
Moreover, there are signs Google may be tapping out its ability to grow by stealing business from its rivals. The company already receives more than 70% of U.S. search-advertising spending, according to market researchers. Mr. Schmidt and Google co-founder Sergey Brin highlighted Google's ongoing investments in search technology on the conference call. Mr. Brin said Google dramatically expanded the size of its search index during the quarter, allowing it to generate better results for obscure queries.

Mountain View, Calif., company posted net income of $1.35 billion, or $4.24 a share, from $1.07 billion, or $3.38 a share. Revenue reached $5.54 billion, up from $4.23 billion a year ago.

Источник: Total Telecom

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