Google profit zooms 36% under new CEO Larry Page
Associated Press July 15, 2011Google Inc CEO Larry Page's traditionally frosty relationship with Wall Street turned into a warm embrace on Thursday after the Internet search leader released strong financial results for its latest quarter.
The results represented Page's first report card since he became CEO at the start of the second quarter in April, ending the decade-long reign of his mentor, Eric Schmidt.
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Although he established himself as engineering and entrepreneurial genius as Google's co-founder, Page has made it clear since the company went public in 2004 that he is more interested in innovation than focusing on the short-term earnings targets set by stock market analysts.
Page's standoffish attitude had raised concerns that Google might not exceed expectations as consistently as it did under Schmidt. The concern had been weighing on Google's stock, causing it to lag well behind the technology-driven Nasdaq composite index.
But the second-quarter results at least temporarily erased the doubts about whether Google can thrive under Page's unorthodox leadership.
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Investors signaled their approval by boosting Google's stock by more than 12 percent. That restored the stock price to where it stood before Page became CEO on April 4.
Page made analysts even happier by sticking around for the company's hour-long conference call with analysts. That was a contrast to a cursory appearance he made at Google's first-quarter call three months ago, which had fed perceptions that Page considered investor relations to be a waste of his time.
In his remarks, Page stressed that he intends to be a "careful steward of shareholders' money," while reiterating his intention to invest heavily in hiring more employees and expanding into other markets in pursuit of even bigger profits in the future.
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"I see more opportunities for Google today than ever before because, believe it or not, we are still in the very early stages of what we want to do," Page, 38, said.
Page's demeanor and commentary "hit all the right notes," said BGC Financial analyst Colin Gillis. "It made people feel like maybe things are going to be OK and that (Page) isn't going to be so hostile toward shareholders after all."
Google earned $2.5 billion, or $7.68 per share, in the April-June period. That's a 36 percent increase from $1.84 billion, or $5.71 per share, a year ago.
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If not for costs covering employee stock compensation, Google says it would have earned $8.74 per share. That figured easily topped the average estimate of $7.84 per share among analysts surveyed by FactSet.
Revenue increased 32 percent to $9 billion, the first time in Google's 13-year history that it has brought in that much money in a quarter.
After subtracting Google's advertising commissions, revenue stood at $6.9 billion - nearly $400 million above analyst projections.
Google shares soared $66.36, or 12.6 percent, to $595.30 in extended trading after finishing the regular session at $528.94. The stock price stood at $591.80 when Page became CEO.
The results are the latest indication that the Internet remains a bright spot in an otherwise lackluster economy.
The contrasts between online and offline commerce during the last few years is like what happened in the Great Depression of the 1930s when "people sold horses and bought cars, so car companies did great," Patrick Pichette, Google's chief financial officer, said in a Thursday interview. "There is a fundamental shift in how the economy runs and we are living that through the digital economy today."
Google fared so well because advertisers were willing to pay higher prices to promote their products on the Internet's largest marketing network. The average price paid per advertising click on Google's network rose 12 percent from last year. Web surfers also found the ads more enticing, clicking on them 18 percent more than they did at the same time last year.
Page delivered the impressive results even while standing by his vow to invest in projects that may take several years to pay off.
Google's newest venture, a Facebook-like social network called Plus, debuted two weeks ago and has grown quickly amid positive reviews.
Page said Thursday that more than 10 million people already have joined Plus even though it still requires an invitation to get into it. By comparison, Facebook has more than 750 million users.
Google is hoping Plus can become as big a hit as its Android software for mobile phones and tablet computers. Although Google gives away the software, it has enabled Google to expand its advertising dominance into the mobile market as more people increasingly connect to the Web away from their home and office computers.
Page said more than 550,000 devices relying on Android are being activated each day. Google estimates there about 135 million devices that rely on Android.
"All of us at Google want to create services that people in the world use twice a day, just like a toothbrush," Page said.
To help carry out its ambitious agenda, Google increased its payroll by 9 per cent, or 2,452 employees, in the quarter to bring its workforce to nearly 28,800 people. The additions included 450 workers inherited as part of the company's $700 million acquisition of airline fare tracker ITA Software.
Through the first half of the year, Google added nearly 4,400 workers. That's well ahead of its pledge to hire at least 6,200 employees this year. Even Page indicated the hiring is occurring a little faster than he anticipated.