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Google unaffected by slowdown in US

"It is clear to us that we are well positioned for 2008 and beyond, regardless of the business environment that we find ourselves surrounded by." — Eric Schmidt, Google CEO

NY Times News Service, SAN FRANCISCO

The US economy may be weakening, but Google said once again that the slowdown has not affected its business.

Easing concerns that its growth would stall, the Internet search giant on Thursday reported better-than-expected financial results for the first three months of the year, igniting a huge rally in the company shares.

“We are obviously very pleased with another strong quarter for Google,” Google CEO Eric Schmidt said during a conference call with Wall Street analysts. “It is clear to us that we are well positioned for 2008 and beyond, regardless of the business environment that we find ourselves surrounded by.”

Schmidt credited improvements to the company’s highly targeted advertising business for its growth, which was stronger overseas than domestically. For the first time, international sales accounted for the majority of revenue.

The results came as a relief to investors, who were bracing for a big slowdown in Google’s business. The company issued its report after the close of markets and its shares surged more than US$76.42, or 17 percent, in after-hours trading to end the day at US$525.96. They had closed down US$5.49 to US$449.54 in regular trading.

Google’s performance is not likely to ease anxiety among investors about the overall health of the online advertising business. The company relies almost exclusively on short text ads that appear next to search results and on other Web sites.

Analysts say that because those ads are more targeted and are used by marketers to drive traffic to their sites, they are more impervious to a slowdown than banners and other graphical ads, which are intended to increase brand awareness. Yahoo, the leader in the sale of display ads, reports financial results on Tuesday.

Some analysts noted that Google’s growth did slow from the previous quarter and said the results do not completely dispel concerns about the health of Google’s business in the US.

“The international piece was solid,” said Ross Sandler, an analyst with RBC Capital Markets. “That is where most of the upside came from. Despite the comments that they are seeing no impact from the economy whatsoever, I think the growth rate in the US deserves more attention.”

Sandler noted that Google’s business in the US had grown little from the last quarter of last year through the first quarter of this year.

Google said net income grew 30 percent to US$1.31 billion, or US$4.12 a share, compared with US$1 billion, or US$3.18 a share, in the first quarter of last year. Revenue climbed 42 percent to US$5.19 billion.

Excluding commissions paid to advertising partners, a widely followed measure, Google’s revenue was US$3.7 billion, slightly higher than analysts expected. Its profit, excluding the cost of stock options, was US$4.84 a share, handily beating forecasts.

On average, analysts were expecting Google to report revenue of US$3.61 billion, excluding commissions to advertising partners, and income of US$4.52 a share, excluding the cost of stock options.
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