Google Inc’s shares dipped sharply in after-hours trading on Thursday after the Internet search giant’s quarterly earnings fell short of the expectations of Wall Street analysts.
The Mountain View, California-based company reported a fourth-quarter net profit of US$2.71 billion, compared with US$2.54 billion in the same quarter a year ago.
Revenue rose 25 percent to US$10.58 billion, but was US$8.13 billion when including traffic acquisition costs — the portion of revenue shared with Google’s partners — less than the US$8.4 billion expected by analysts.
Earnings per share of US$9.50 were below analyst forecasts of US$10.49.
Google shares were down 9.12 percent at US$581.25 in after-hours trading, after gaining 1.05 percent during the day on Wall Street.
Investors are used to Google matching or surpassing analysts’ forecasts and its shares tend to suffer when the company fails to meet the always lofty expectations.
Google CEO Larry Page said it had a “really strong quarter ending a great year.”
“Full-year revenue was up 29 percent, and our quarterly revenue blew past the US$10 billion mark for the first time,” Page said in a statement.
He said he was “super excited about the growth of Android, Gmail, and Google+, which now has 90 million users globally — well over double what I announced just three months ago.”
In a conference call with financial analysts, Page said user engagement with Google+, the Internet titan’s Facebook rival, is “growing tremendously.”
“Plus users are very engaged with our product, over 60 percent of them engage daily and over 80 percent weekly,” he said.
Page, who took over as chief executive from Eric Schmidt in April of last year, said growth of the Android software platform for mobile devices was “quite simply mind-boggling.”
He said that 700,000 Android-powered phones are activated every day and there are 250 million Android devices in total, up 50 million since November.
Google’s free e-mail program, Gmail, has more than 350 million active users “and is growing rapidly,” Page said.
Chief financial officer Patrick Pichette said display advertising growth remained strong and revenue was rising in every region despite the crisis in Europe.
However, the good news did not offset concerns about Google’s first year-on-year decline in its cost-per-click (CPC), or money paid by marketers to the company for search ads, in more than two years, leading to nearly half a dozen questions from analysts during the call.
Google executives said the decline in search ad rates was primarily because of the impact of foreign currency exchange fluctuations and changes to the company’s advertising formats.
The new ad formats drove a sharp increase in the total number of clicks by Web surfers on Google’s search ads — up 34 percent year-on-year — even though some of the format changes impacted prices negatively, Google executives said.
However, many analysts wondered whether Google’s mobile advertising, which is generally believed to command lower ad rates, played a bigger part in the cost-per-click decline than Google let on.
“This was the first time we’ve seen a decline in CPC rates since 2009,” Needham & Co analyst Kerry Rice said. “The one thing that’s really changed about this is mobile.”
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