Google back on growth track, eyes deals
Written on October 16, 2009
Google Inc’s growth machine is back in gear.
The world’s No. 1 search engine not only posted higher-than-expected third-quarter profits and revenues, but also said it was looking for major acquisitions and could buy a large company “maybe every year or two.”
“While there is a lot of uncertainty about the pace of economic recovery, we believe the worst of the recession is behind us and now feel confident about investing heavily in our future,” Google Chief Executive Eric Schmidt said on Thursday.
“We’re open for business in making strategic acquisitions, both large and small,” he told analysts on a conference call.
Shares of Google, which have surged over 80 percent since mid-March and set a fresh 52-week high this week, rose 3.2 percent to $547.00 in extended trading.
Google was widely expected to be one of the biggest, early beneficiaries of an economic recovery, thanks to its dominance of the online search market, whose growth has slowed as recession-hit companies cut back on advertising spending.
Net revenue in the third quarter — excluding traffic acquisition costs, or the money that Google shares with partners — rose 8.5 percent from a year earlier to $4.38 billion, beating the $4.24 billion expected by analysts.
Net revenue also grew quarter-on-quarter for the first time this year, after being roughly flat in the second quarter and falling for the first time ever in the first quarter.
“Google has no competition. Yahoo is withering on the vine and (Microsoft’s) Bing is too tiny now,” said Colin Gillis, senior analyst at Brigantine Advisors.
“They did great on every single metric. We think this is sustainable.”
Net income was $1.64 billion, or $5.13 a share, compared with $1.29 billion, or $4.06 per share, a year earlier.
Excluding special items, profit per share was $5.89, beating the $5.42 expected by analysts, according to Thomson Reuters I/B/E/S.
Google is still a long way off from the double-digit growth it once enjoyed, but analysts believe search advertising, which accounts for the majority of its business, will be quicker to recover from the ad slump than the display ad business that companies like Yahoo and Time Warner’s AOL depend on.
“There is upside pretty much across the board in terms of revenue — U.S. beat our estimates, international significantly beat our estimates … and EPS beat our estimates,” said Ross Sandler, senior Internet analyst at RBC Capital Markets.
But Sandler sounded a note of caution about spending at Google: “The only thing making investors cautious is that Schmidt mentioned investing heavily on our future.”
Filed in: money.