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Sat, Apr 21, 2007 - Page 10 News List

Google's profits surge 69 percent in first quarter

SOLID PERFORMANCE While the company is diversifying into new areas, search and online advertising remained its strongest income earner

NY TIMES NEWS SERVICE , SAN FRANCISCO

For much of this year, the buzz around Google Inc has been all about the flurry of new initiatives at the No. 1 Internet search company, from its YouTube video sharing site, to its new software for office workers, to its forays into television, radio and newspaper advertising.

On Thursday, Google executives sought to change the focus.

The company said that nearly three of every four Googlers, as the firm's workers call themselves, remain focused on the business that turned Google into a money-minting Internet powerhouse: search and online advertising.

And it is that business, executives said, that delivered a surge in Google's profits during the first three months of the year, as the company continued to outpace rivals like Microsoft Corp and Yahoo Inc.

"We are ecstatic about our financial results this past quarter," said Google chief executive Eric Schmidt during a conference call.

Google said first-quarter profit rose 69 percent to US$1 billion, or US$3.18 a share, up from US$592.3 million, or US$1.95 a share, in the same period a year ago. The results topped analysts' expectations, sending Google's shares up more than 3 percent in after-hours trading.

Schmidt predicted that search and advertising would continue to be the main source of profits for the foreseeable future.

"The core business is search and ads," Schmidt said. "We are still at the beginning of that business. It is a huge business, and we have a lot of room to grow."

For example, Schmidt said that just as in previous quarters, the company had devoted significant resources to continuing to perfect the art of linking search results with ads that are tailored to users' interests. Since Google gets paid when users click on an ad, those efforts translate into higher profitability.

"We are showing fewer ads and those ads are worth more because they are better targeted," Schmidt said.

Overall quarterly revenue was US$3.66 billion, up from US$2.25 billion a year ago. Excluding commissions paid to marketing partners, revenue was US$2.53 billion, compared with US$1.53 billion a year earlier.

Excluding certain expenses, like stock-based compensation, profits were US$3.68 a share, though analysts noted that without a benefit resulting from a change in tax rates, the figure would have been US$3.50. On that basis, analysts polled by Thomson Financial had expected Google to earn US$3.30 a share and report revenue, without the marketing commissions, of US$2.5 billion.

"Google has been able to deliver amazing profitability given its enormous investments in human resources and capital equipment," said Jordan Rohan, an analyst with RBC Capital Markets.

Google said its overseas business was particularly strong. Revenue from outside the US was US$1.7 billion, or 47 percent of the total.

Google's strong growth stands in sharp contrast to that of Yahoo, which earlier this week announced that sales had increased 7 percent from the year-ago quarter, while profits dropped 11 percent.

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