San Francisco — Investors appear ready to embrace tech giant Google Inc. again after weeks of hand wringing amid concerns over the company’s ability whether the company’s ascent would be slowed by a weakened U.S. economy.
“Google’s earnings climbed up 31 percent to $1.31 billion and revenue swelled up 42 percent to $5.19 billion compared with the same period last year.”
The Mountain View, Calif., company accredited the accomplishment, which exceeded analysts’ expectations, to growth overseas and improvements in its formula for delivering ads alongside search results and on third-party sites.
“It is clear we are well positioned for 2008 and beyond, regardless of the business environment we are surrounded by,” chief executive Eric E. Schmidt told analysts during a conference call.
The report outflanked many Wall Street analysts with first-quarter earnings, who had boiled down their forecasts for Google’s growth that surpassed their predictions, propelled by an aggressive push outside the United States.
“Google has completely silenced the cynics,” said Jeffrey Lindsay, a senior analyst with Bernstein Research.
For the three months ended March 31, Google posted a profit of $1.31 billion ($4.12 per share), compared with $1 billion ($3.18) a year ago. Its adjusted earnings jumped to $4.84 per share, easily beating mean estimates from Thomson Financial for $4.52. Total net revenue soared 42% to $5.19 billion from $3.66 billion a year ago.
The pleasing surprise, presented late Thursday, raised Google’s recently sagging shares by nearly 17 percent, or $75.89, to $525.43 at the open of trade Friday.
“This is mostly a relief rally,” Stanford Group analyst Clayton Moran said. “People are relieved that things are not as bad as they thought.”
Google also put to rest any fears that were founded to some extent on results from comScore, a Reston firm that tracks Internet use, showing that the growth in the number of “paid clicks” people were making on Google’s search ads was rapidly slowing.
Based on the comScore report, Wall Street analysts had estimated Google to report net revenue of $3.59 billion and earnings of $4.52 a share. Instead, Google’s net revenue was $3.7 billion and earnings were $4.84 a share.
The ace in Google’s hand: international sales, which exceeded its U.S. sales for the first time. Revenue from outside the United States was $2.65 billion, or 51 percent of total revenue. The boom in international business helped Google lower its tax rate to 24 percent from last year’s 25 percent to 27 percent.
“Google also benefited from the weak dollar, earning an extra $202 million.”
“Google should be effectively considered a global company,” said David Garrity of Dinosaur Research. Garrity, who had rated Google a buy with a price target of $534, said the Mountain View company could climb back up to its 52-week high of $747.24 over the next year.
As Google in general gets paid by the click, any stall in those clicks would be significant. This “marks a significant deceleration,” Bear Stearns said in a report last week.
Company executives said search advertising, thus far, has resisted the economic downturn. Rather, they say the fewer clicks will be outweighed by more cash spent per click.
“Targeted advertising does well in pretty much most scenarios, we think,” Schmidt said. “We do not see an impact as of this time.”
Company executives said Google continues to brace for even further growth.
Schmidt pointed out Google’s recent acquisition of DoubleClick, which is anticipated to help Google spread out from its core business in search-based advertising into other types of Internet marketing involving display and video ads.
“As we integrate DoubleClick into our advertising platform, we see exciting new ways to improve the user experience and increase value for our advertisers and partners,” Schmidt said.
In another development, a source familiar with the matter confirmed that Yahoo is close to sealing a partnership with Google. The trials went well and both sides have moved closer to a more permanent partnership, The Wall Street Journal reported on Thursday.
During an interview, Google co-founder Sergey Brin said Google was thrilled to be functioning with Yahoo. If successful in making a positive agreement, such a deal may perhaps complicate Microsoft’s $42 billion effort to acquire Yahoo.