Google Inc is ramping up spending to invest in new technologies and fend off competition on mobile devices, even as its maturing Web-advertising business posted quarterly profit and sales that fell short of estimates.
Fourth-quarter profit, excluding some items, was US$6.88 per share on revenue of US$14.5 billion, Google said in a statement on Thursday, compared with analysts’ average projections of US$7.11 and US$14.7 billion. Expenses jumped as Google added more staff and real estate, while currency fluctuations dented revenue.
While Facebook Inc and other Internet companies are seeking to lure away users and advertisers on tablets and smartphones, Google’s shares were buoyed in late trading amid signs of strength in the search provider’s main businesses and optimism that the company will use its cash pile to enter new markets to secure future growth.
“They didn’t do anything that was dramatically inconsistent with what they’ve been doing,” Pivotal Research Group LLC analyst Brian Wieser said. “You’ve got top-line growth that overall is reasonably solid and you have margin erosion, largely due to diversification.”
Foreign currency fluctuations also weighed on results. Google said total revenue would have been higher by US$541 million from the prior quarter without the impact of a stronger US dollar, which reduces the amount of overseas income that can be counted back home. Marketers also paid less for mobile ads, driving down the average price of spots by 3 percent in the quarter.
Google shares rose in extended trading. The stock advanced less than 1 percent to US$513.23 at the close in New York and was down 5.4 percent last year, compared with an 11 percent gain in the Standard & Poor’s 500 Index.
CEO Larry Page stepped up spending, as Google invests in areas outside of the company’s main search-ad business, from high-speed Internet service and driverless cars to digital-payments systems and Web-linked glasses.
Operating expenses, which include engineering and sales staff, reached US$6.78 billion in the fourth quarter, a 35 percent increase from a year earlier. That compares with quarterly operating expenses of US$5.5 billion at Apple Inc, whose revenue was more than five times greater than Google’s in the same period.
“In many ways, 2014 was a year of significant investment growth,” chief financial officer Patrick Pichette said on a conference call. “We’ll continue to seek a healthy balance between growth and discipline.”
While Pichette said there are many promising areas for future growth, he also pointed to Glass as an example of how the company can also be ready to pull back on a project.
“In those situations where they don’t have the impact we hope for, we do make the tough calls,” Pichette said.
Pichette also said in the conference call that Google would be willing to “throw a little back” when the company reached a limit on how much it could invest in operations.
“We do review this issue on a regular basis,” Pichette said when asked whether Google was closer to returning cash to shareholders. “I just have nothing to announce today.”
Fourth-quarter net income rose by 41 percent to US$4.76 billion, or US$6.91 per share, from US$3.38 billion, or US$4.95, a year earlier.
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