Internet and search engine giant Google Inc. (GOOG) Thursday said its second quarter profit increased from last year, despite the slowest revenue growth rate in its 19 quarters as a public company. Google's quarterly adjusted earnings came in ahead of analysts' expectations as did quarterly revenue. Following the news, the company's shares lost more than 3% in the after-hours, indicating investor disappointment over the results.
The Mountain View, California-based company reported net income on a GAAP basis of $1.48 billion or $4.66 per share for the second quarter of 2009, up from $1.25 billion or $3.92 per share in the prior year quarter.
Excluding items, net income on a non-GAAP basis grew to $1.71 billion or $5.36 per share from $1.47 billion or $4.63 per share in the year-ago quarter. On average, 33 analysts polled by Thomson Reuters expected the company to earn $5.09 per share for the second quarter. Analysts' estimates typically exclude one-time items.
GAAP operating income for the second quarter of 2009 was $1.87 billion, or 34% of revenues, compared to $1.58 billion, or 29% of revenues, in the previous year quarter.
Non-GAAP operating income was $2.17 billion, or 39% of revenues, compared to $1.85 billion, or 34% of revenues, in the second quarter of 2008.
Commenting on the results, Eric Schmidt, CEO of Google observed, "These results highlight the enduring strength of our business model and our responsible efforts to manage expenses in a way that puts us in a good position for the economic upturn, when it occurs."
Second quarter gross revenues increased 3% to $5.52 billion from $5.37 billion in the same quarter last year. Excluding traffic acquisition costs, revenue rose 4.4% to $4.07 billion from $3.90 billion a year earlier. Thirty-one analysts had a consensus revenue estimate of $4.06 billion for the second quarter.
Compared to last year, Google's gross revenue increased only 3%, while revenue, excluding traffic acquisition costs, posted a 4.4% growth, by far the slowest growth rate in its 19 quarters as a public company.
Google-owned sites generated revenues that rose 3% to $3.65 billion, or 66% of total revenues for the second quarter.
Revenues from Google's partner sites, which is run through AdSense programs, grew 2% to $1.68 billion, representing 31% of total revenues.
International revenues totaled $2.91 billion, representing 53% of total revenues in the second quarter of 2009, compared to 52% in the first quarter of 2009 and second quarter of 2008. Excluding gains related to foreign exchange risk management program, the company's revenues would have been $44 million lower in the second quarter of 2009.
Aggregate paid clicks, which include clicks related to ads served on Google sites and the sites of its AdSense partners, increased 15% over the second quarter of 2008, but decreased 2% from the preceding quarter.
Average cost-per-click decreased about 13% over the prior year quarter, but increased about 5% from the first quarter of 2009.
Operating expenses, other than cost of revenues, for the second quarter eased to $1.54 billion, or 28% of revenues, from $1.64 billion, or 31% of revenues in the second quarter of 2008.
On a worldwide basis, Google employed 19,786 full-time employees at the end of the second quarter, down from 20,164 full-time employees at the end of the previous quarter.
Google continued to lead the U.S. web search engine rankings in June, followed by Yahoo! Inc. (YHOO). However, Google lost market share in June, dropping to 78.48% from 78.72% in May. Yahoo's share rose to 11.04% from 10.99%.
Bing, Microsoft Corp.'s (MSFT) new search engine, has increased the software giant's share of the United States search market by 1% in its first month of operation.
Bing, which was launched on June 3, took 8.23% of Web searches in the United States during the month of June, according to an analysis by Web traffic analysis firm StatCounter. This continues an upward trend for Microsoft in the search market. The company took 7.21% of searches in April, and 7.81% in May, just prior to Bing's launch.
Intensifying its battle against Microsoft, Google last week said it is preparing to launch an operating system, Google Chrome for personal computers. Google will open-source the new operating system's code later this year, and netbooks running Google Chrome will be available for consumers in the second half of 2010.
With the new project, Google is targeting the market of Microsoft's Windows operating system.
According to Google, the new operating system is an extension of its Google Chrome browser. The company launched the Google Chrome browser nine months ago and over 30 million people use it regularly.
Speed, simplicity and security are the key aspects of the Google Chrome OS, the company noted. The company is completely redesigning the underlying security architecture of the OS so that users don't have to deal with viruses, malware and security updates.
The company also said that the Google Chrome OS is a new project, separate from Android, which was designed to work across a variety of devices from phones to set-top boxes to netbooks.
Earlier this month, the U.S. Department of Justice initiated an antitrust probe against Google regarding a settlement deal between Google and representatives of publishers and authors, regarding which a class action lawsuit was filed by The Authors Guild.
The DOJ stated that it has yet to determine the merit of the settlement or more broadly "what impact this settlement may have on competition." The DOJ, however, noted that the issues raised by the settlement deal warrant further inquiry.
Looking ahead, Schmidt said, "We remain focused on investing in technical innovation to drive growth in our core and new businesses."
Google's peer Yahoo! is slated to announce its second-quarter results on July 21. Street analysts forecast earnings of $0.08 per share for the quarter on revenues of $1.14 billion.
Yahoo has projected second-quarter revenue of $1.425 billion to $1.625 billion, which includes traffic acquisition costs.
Google closed Thursday's regular trading session at $442.60, up $4.43 or 1.01%, on a volume of 6.45 million shares. However, in the after-hours, the stock lost $14.93 or 3.37%.
The stock has been moving in a range of $247.30 - $537.05 for the past 52 weeks, with an average daily volume of about 3.36 million shares for the past three months.
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