Google Inc.'s Internet-leading search engine fueled a sevenfold increase in fourth-quarter profits to soar past analyst expectations.
SAN FRANCISCO — Google Inc.’s Internet-leading search engine fueled a sevenfold increase in fourth-quarter profits to soar past analyst expectations.
The Mountain View-based company said today that it earned $204.1 million, or 71 cents per share, during the final three months of 2004. That compared to net income of $27.3 million, or 10 cents per share, at the same time in 2003.
Revenue for the period totaled $1.03 billion, more than doubling from $512.2 million in the prior year. After subtracting commissions paid to other Web sites in its advertising network, Google’s fourth-quarter revenue worked out to $653.5 million.
If not for a $60 million charge to cover stock compensation paid to its employees, Google would have earned 92 cents per share, unadjusted from income taxes. That figure exceeded the mean estimate of 77 cents per share among analysts surveyed by Thomson First Call. It marked the second consecutive quarter that Google has blown by analysts’ earnings estimates since the company’s closely watched initial public offering of stock nearly six months ago.
The company released the results after the stock market closed. Google’s shares fell $3.72 to close at $191.90 on the Nasdaq Stock Market, then climbed by $10.14, or 5.3 percent, in extended trading. The shares have reached a high of $205.30 since Google’s IPO, which was priced at $85.
Google’s stock has emerged as one of the priciest on Wall Street largely because investors are betting the company’s iconic search engine will continue to attract hordes of advertisers, producing breakneck earnings growth.
Although Google co-founders Sergey Brin and Larry Page have warned they might make decisions that weaken short-term earnings, Wall Street’s high expectations means the company must handily beat analyst estimates or risk a sharp drop in its high-flying stock.
Based on today’s closing stock price, Google’s market value stood at $55 billion — more than General Motors Corp. and Ford Motor Co. combined. Google’s stock carries a price-to-earnings ratio of nearly 230, an extremely high multiple for a measure that is widely used to appraise a company’s value. By comparison, other well-known — and older — Internet companies such as Yahoo Inc., Amazon.com Inc. and eBay Inc. have price-to-earnings multiples ranging between 58 and 68.
Google, formed just 61/2 years ago, has thrived so far by first building an efficient search engine that indexes much of the Internet and then transforming the technology into an advertising magnet. A wide range of businesses now bid for the right have their text-based ads displayed alongside the search results at Google and a long list of other Web sites that are paid whenever visitors click on a commercial link.
The concept has intensified the competition facing Google as technology heavyweights such as Microsoft Corp. and Yahoo Inc., along with a host of smaller companies, have introduced rival products. Google has maintained its leadership, although Yahoo has narrowed since unveiling its own search technology nearly a year ago. Microsoft is stepping up its threat with a multimedia advertising blitz to promote a new search engine on its MSN site.
For all of 2004, Google earned $399.1 million, or $1.46 per share, on revenue of $3.19 billion, In 2003, the company earned $105.6 million, or 41 cents per share, on revenue of $1.47 billion.