Google Exceeds Estimates; Shares Surge

Google Exceeds Estimates; Shares Surge

Google Inc. (GOOG), owner of the world’s most popular search engine, reported sales that beat estimates as businesses spent more on advertising to online consumers. The shares rose in extended trading.

Third-quarter sales, excluding revenue passed on to partner sites, rose to $7.51 billion, Mountain View, California-based Google said on its website. That topped the $7.23 billion average of analyst’s estimates compiled by Bloomberg. Net income climbed 26 percent to $2.73 billion, or $8.33 a share, from $2.17 billion, or $6.72, a year earlier.

Google, even amid concerns about the economy, is benefitting from growing demand for online advertising, including the search- based marketing that makes up most of its sales. Search-based advertising should reach $37.7 billion this year globally, up 23 percent, while total Internet ad spending should climb 20 percent percent, according to media researcher MagnaGlobal.

“Search is good,” said Kerry Rice, an analyst at Needham & Co. in San Francisco who rates the stock a buy and doesn’t own shares. “Paid search is still the biggest component of online advertising, and Google’s obviously going to win the vast majority of that dollar.”

Google rose 1.9 percent to close at $558.99 on the Nasdaq Stock Market. The shares have dropped 5.9 percent this year.

Third-quarter profit, excluding some items, was $9.72 a share, exceeding the $8.76 average of analysts’ estimates.

Even with more competition from Microsoft Corp. (MSFT), Google picked up market share in the U.S., according to Sunnyvale, California-based Efficient Frontier Inc., which helps companies promote products online. Google had 82 percent of spending on search advertising in the third quarter, up from 81 percent in the two previous quarters.

Microsoft, Yahoo
Microsoft, which provides search and ad services for Yahoo! Inc.’s U.S. websites under a new agreement, had 18 percent, down from 19 percent in the previous two quarters, according to Efficient Frontier.

Google also has made gains in the share of searches made by online surfers. The company increased its U.S. market share to 65.3 percent in September, up from 64.8 percent in August, according to ComScore Inc. Yahoo remained No. 2, even as its market share fell to 15.5 percent from 16.3 percent. Microsoft was unchanged at 14.7 percent.

While traditional searches may be growing, Google is pushing into new areas, including mobile. Google’s Android software has emerged as the biggest smartphone operating system, bolstered by HTC Corp., Samsung Electronics Co. and Motorola Mobility Holdings Inc. adopting the software.

With the growth, Google and device makers have faced legal challenges around the world from Oracle Corp. and others. To bolster its patent lineup, Google said in August it planned to purchase Motorola Mobility for $12.5 billion, its largest acquisition ever. The move bolsters its intellectual property, with Motorola Mobility bringing more than 17,000 patents.

source: bloomberg.com