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After results top views, Google CEO calls Q4 easy part

Google Inc. Chief Executive Eric Schmidt said the fourth quarter was in some ways "the easy part" as the Internet search giant moves forward into uncharted economic territory, but he expressed confidence that his company was prepared to get through the worldwide recession with "no problem."

Schmidt made his comments during a conference call with analysts after the Mountain View, Calif.-based company reported fourth-quarter results that topped Wall Street analysts' recently lowered expectations.

Referring to Schmidt's "easy part" comment, Senior Vice President Jonathan Rosenberg explained that retailers stocked a lot of inventory in anticipation of a better holiday shopping season, and when consumers started to comparison shop, advertisers responded with deals to make sure they could sell their goods.

"One of the things we have to ask ourselves now is how much of that inventory has actually flowed through the system. Obviously, we would be adversely impacted if it was less total commerce moving through. So that's really the wildcard that we need to watch," said Rosenberg.

Schmidt said the company had responded to the downturn with "prudent management" and that Google was prepared to continue taking the kinds of actions it had taken in the past last quarter.

"We had tight control over costs, something which had eluded us perhaps in the past but we've got the formula down now," he said.

Google has over the past few months taken steps to increase revenue and curtail costs. It has started to accept once-banned ads for alcohol, opened up once commercial-free sections of its Web properties, shuttered little-used products and even laid off 100 full-time employees, the first mass firings ever at the company.

"We continue to be impressed by its cost controls," said Edward Jones analyst Andy Miedler.

Google earlier said fourth-quarter net income tumbled 68% because of asset-impairment and stock-based compensation charges, but the company reported stronger-than-expected revenue growth and non-GAAP earnings.

The company also recorded stock-based compensation charges of $286 million and a $1.09 billion asset-impairment charge related to investments in Internet providers AOL and Clearwire.

The search-engine giant reported net income of $382.4 million, or $1.21 a share, down from $1.21 billion, or $3.79 a share, a year ago. Excluding special items, earnings were $5.10 a share.

Net revenue was $4.22 billion. Analysts expected pro forma earnings of $4.95 a share on revenue of $4.12 billion, excluding traffic-acquisition costs.

Analysts said Thursday that Google's results continued to demonstrate the company is far better positioned than most to endure the current downturn, even though there are signs the recession has begun to squeeze the Internet search advertising market, the source of almost all of Google's revenue.

"Everybody feared the worst, but Google continues to deliver strong growth given its market leading position," said Miedler.

Schmidt said it was unclear how long the global downturn would last, but said the company's focus remained for the long term and said the company would invest in Google's core search and advertising business, as well as display, mobile and enterprise.

But he acknowledged once again that Google continues to struggle to find the right model to squeeze out revenues from its YouTube video sharing property.

"I think it's fair to say that we've not found a single solution that really drives revenue, for example, wildly and we're certainly working on that," he told analysts.

Google's U.S. paid clicks in the fourth quarter increased about 18% from a year earlier, but executives declined to detail how the recession was affecting the rates that advertisers pay to display their ads next to Google's search results.

"Consumers are doing more comparison shopping, so they're clicking more, but in some verticals they aren't necessarily converting as much or maybe what they're engaged in is smaller purchase sizes," said Rosenberg.

But he said he didn't expect the recession would touch off a deflationary spiral in keyword prices.

"I don't think you'd sort of see a CPC-based deflationary spiral because some modest number of businesses went out of business. I think that the (keyword) auction is pretty robust," he said.

Google shares were at $311.50 in after-hours trading, after closing the regular session up 1.1% at $306.50.

Источник: Total Telecom

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