Google Inc’s growth machine is back in gear.
The world’s No. 1 search engine not only posted higher-than-expected third-quarter profits and revenues, but also said it was looking for major acquisitions and could buy a large company “maybe every year or two.”
“We’re open for business in making strategic acquisitions, both large and small,” Google CEO Eric Schmidt told analysts on a conference call.
Google executives said large advertisers were more eager to spend on search ads in the third quarter and consumers shopped more online, helping the Internet company notch its strongest quarter-on-quarter revenue growth since 2007’s final quarter, underscoring improving economic conditions.
Shares of Google, which have surged more than 80 percent since mid-March, rose 3.2 percent to US$547.00 following the earnings report, after closing down 1 percent at US$529.91 on NASDAQ on Thursday.
“It’s a reflection of the fact that there’s a lot more economic activity going on on the Internet,” Sanford Bernstein analyst Jeff Lindsay said.
Google said both the amount of money that advertisers pay for the text ads that appear alongside search results as well as the number of clicks on those ads by Web surfers increased quarter-over-quarter.
Finance chief Patrick Pichette said the company was monetizing more than 1 billion video views a week on YouTube, the popular video site that Google bought for US$1.65 billion in 2006.
He reiterated comments made last quarter that YouTube was on track to become profitable in the “not too distant future.”
And executives said searches on mobile devices, like smartphones, increased 30 percent quarter over quarter, though they declined to offer details about how mobile ad rates compared with rates for ads in the standard search engine.
Google’s net revenue in the third quarter — excluding traffic acquisition costs, or the money that Google shares with partners — rose 8.5 percent from a year earlier to US$4.38 billion, beating the US$4.24 billion expected by analysts.
Net revenue also grew quarter-on-quarter for the first time this year, after being roughly flat in the second quarter and falling for the first time ever in the first quarter.
Net income was US$1.64 billion, or US$5.13 a share, compared with US$1.29 billion, or US$4.06 per share, a year earlier, thanks in part to ongoing cost controls at the Mountain View, California company.
Excluding special items, profit per share was US$5.89, beating the US$5.42 expected by analysts, according to Thomson Reuters’ Institutional Brokers’ Estimate System.
However some analysts sounded a note of caution about Google’s spending going forward.
“The only thing making investors cautious is that Schmidt mentioned investing heavily on our future,” RBC Capital Markets analyst Ross Sandler said.
Schmidt had told Reuters last month that Google expects to buy one small company a month as it starts up its dealmaking machine again after a breather during the worst period of the financial crisis.
He said on Thursday that any large deals would need to have a significant strategic rationale, such as accelerating revenue or providing access to a “major, major” pool of customers that Google cannot currently reach.
Besides acquisitions, Google plans to step up hiring of engineers and salespeople as well as invest in new projects as its business improves and worries about the economy recede.
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