Google’s second-quarter profit seems likely to erase any lingering doubts about which internet company rules the web.
While rivals eBay and Yahoo! merely matched analysts’ earnings expectations, Google on Thursday soared well beyond Wall Street’s financial hurdle — just like the online search engine leader has done in all but one quarter since it went public nearly two years ago.
”Google is clearly winning the battle,” said internet analyst Derek Brown of Pacific Growth Equities. ”These are almost logic-defying results.”
The Mountain View, California-based company earned $721,1-million, or $2,33 per share, during the three months ended in June, more than doubling its net income of $342,8-million, or $1,19 per share, at the same time last year.
Excluding expenses for employee stock compensation and several other one-time items, Google said it earned $2,49 per share — well above the average estimate of $2,22 per share among 32 analysts surveyed by Thomson Financial.
Google’s search engine has been firing on all cylinders for so long that investors almost seem to take its high-powered performance for granted.
It marks the seventh time in eight quarters as a public company that Google has beat Wall Street’s expectations, even though its management insists the search engine isn’t being steered by investors’ relentless push for higher profit.
Revenue for the period totalled $2,46-billion, a 77% increase from $1,38-billion a year ago.
Google’s revenue fell to $1,67-billion after subtracting commissions paid to its partners in the internet’s largest advertising network.
The post-commission revenue was $26-million above the average analyst estimate.
”It looks like our model continues to work very well,” Google chief executive Eric Schmidt said during a conference call on Thursday with analysts. ”It’s another good day and another good quarter for Google.”
Brown thought that was putting it mildly.
”This quarter should put to rest any questions about Google hitting some kind of wall” in its growth, Brown said.
”They seem to be knocking all the walls down.”
Yet the quarter wasn’t enough to spur Google’s stock to new heights. The company’s shares fell $11,88 to close at $387,12 on the Nasdaq Stock Market, then crept up $2,78, or 0,7%, in extended trading. The stock price remains well below its record high of $475,11 reached in January.
Google’s second-quarter contrasted sharply with both Yahoo!, the owner of the web’s most visited site, and eBay, the largest e-commerce destination. Both matched expectations, but that’s almost considered a letdown for rapidly growing internet firms.
Yahoo! compounded the disappointment over its results by postponing a key piece of advertising technology aimed at boosting its revenue and improving its competitive position.
Meanwhile, Google seems determined on widening its already formidable lead in internet search.
In an interview on Thursday, Schmidt said Google’s engineers made 14 different changes to the search engine’s formula during the second quarter in an effort to display more relevant ads and spur more revenue-generating clicks by web surfers. ”It is powering at full blast,” Schmidt said of the search engine’s advertising
formula.
Through June, Google held a 44,7% share of the US search engine market, up from 36,9% at the same time last year, according to comScore Media Metrix. Yahoo! ranked a distant second at a 28,5% share, comScore said.
Google’s websites also have been attracting more new users than Yahoo!, Microsoft and Time Warner — the owners of the internet’s most trafficked websites.
In the second quarter, Google’s US audience averaged 95,2-million per month, a 25% increase from last year, according to Nielsen/NetRatings. Although they still ranked ahead of Google with average monthly audiences of more than 100-million,
Yahoo!, Microsoft and Time Warner only registered annual growth rates ranging from 4% to 9%.
Drawing more people to its site is important to Google because the company makes more money when ads are clicked upon there.
Google generated $1,43-billion of its second-quarter revenue from activity on its own site, a 94% increase from last year.
Advertising wasn’t the only factor lifting Google’s second quarter profit. A slightly lower tax rate also helped. The second-quarter tax rate was 26%, below Google’s estimated rate of as much as 30% for the entire year.
Because the company’s tax rate was 27% during the first quarter, Google’s rates will rise during the next six months if the full-year rate turns out to be as high as 30%. A higher tax rate would slow the company’s earnings growth. – Sapa-AP