Google net rises 61% as stock is split

Google Inc. reported a sharp gain in quarterly profit Thursday, as the Internet search giant moved ahead with a long-anticipated stock split that keeps it firmly under the control of its co-founders.

The split grants a new share to existing stockholders via a tax-free dividend, but that share has no voting power--a move that benefits stockholders financially while keeping CEO Larry Page, his co-founder Sergey Brin and Executive Chairman Eric Schmidt securely in charge.

According to a recent regulatory filing, thanks to Google's dual-class stock structure Page and Brin each have about 29% of total voting power, while Schmidt has about 10%.
Google, of Mountain View, Calif., said first-quarter profit rose 61% as it kept costs in check and saw a sharp increase in interest in advertising within its dominant search engine.

Page said during a conference call with analysts he is striving to instill "the soul of a start-up" in the company, following a "clean up" that saw it close or combine some 30 different products.

First quarter profit was $2.89 billion, Google said, or $10.08 a share on an adjusted basis. Net revenue came in at about $8.1 billion.
Analysts polled by Thomson Reuters had expected Google to report adjusted earnings of $9.65 a share, and nearly $8.2 billion in net revenue.
Shares of Google rose about 0.3% to $652.75 in after-hours trading.
"Overall, it was pretty positive," ITG analyst Steve Weinstein said of Google's report, adding,"They did a good job of controlling expenses."

Google's earnings news follows a fourth-quarter report issued in January that largely disappointed. That prior report included a surprising 8% decline in the average price paid by advertisers for clicks in Google's dominant search engine in the quarter, which many analysts found disconcerting.

On Thursday, Google said those prices paid by advertisers, or costs per click, fell 12% in the first quarter, at the low end of expectations.
ITG's Weinstein said investors shouldn't make too much of the declining average price of clicks, noting that it's attributable to a number of factors including more low-priced ads appearing in emerging markets."There's just a mix shift in the business," the analyst said.

Chief Financial Officer Patrick Pichette acknowledged that one factor has been growing use of Google on mobile devices--where prices are now equivalent to what advertisers were paying for desktop PC search ads on Google around the time it went public in 2004.

Page said that he's "bullish" that prices paid by advertisers for clicks on mobile devices will improve sharply over time.

Google has noted that the drop in prices per click has been accompanied by a surge in overall clicks, indicating that their core search advertising business is healthy.
The company said its paid clicks, a measure of the rate at which users are clicking on advertisements in its search engine, jumped 39% in the first quarter.

Google's strong report was clouded somewhat by questions about the concurrent stock split announcement, which took many by surprise.

In a note posted online to explain the split, which keeps control of Google's strategic direction with its co-founders and Schmidt, Page and Brin said the company's taking of "risks has been crucial to Google's overall success and we aim to maintain this pioneering culture going forward."

Part of Google's risk taking has included a willingness to spend heavily to expand into newer businesses such as online display advertising and social networking.
But the company said operating expenses as a percentage of revenue dipped to 33% in the first quarter, from 39% in the period last year.

The company said it added about 600 new employees in the quarter, bringing its total to 33,077. That compares to 1,114 new hires in the prior period.

Google had set a new annual hiring record last year when it added more than 8,000 employees.
As of the end of the first quarter, Google reported having $49.3 billion in cash and equivalents. That growing hoard has raised questions about whether Google may offer some of it back to shareholders in the form of a dividend--one that does not involve a stock split.

Pichette noted that the amount of cash held by the company both in the U.S. and abroad is "incredibly healthy," but added that he had nothing else related to announce.

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13 April 2024

12 04 2024