Investors initially reacted with disappointment to Google's fourth-quarter earnings announced Thursday but seemed to reconsider as they had more time to digest the results. By late Thursday, the company's shares were only 40 cents below their closing price $582.98 after initially sagging by as much as $33.98, or nearly 6 percent, in extended trading.
SAN FRANCISCO — Google reeled in more Internet advertising during the holiday shopping season and approached $2 billion in quarterly profit for the first time, providing the strongest sign yet that the Internet search leader has shaken off the recession’s doldrums.
The fourth-quarter earnings announced Thursday topped analyst estimates, but revenue only matched forecasts.
Investors initially reacted with disappointment but seemed to reconsider as they had more time to digest the results. By late Thursday, the company’s shares were only 40 cents below their closing price of $582.98 after initially sagging by as much as $33.98, or nearly 6 percent, in extended trading.
Google made $1.97 billion, or $6.13 per share, in the final three months of 2009. That was up dramatically from income of $382 million at the same time in 2008, when Google’s earnings were deflated by charges to reflect the eroding value of some investments.
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Fourth-quarter revenue totaled $6.7 billion, a 17 percent increase. The revenue was also up by more than 10 percent from the previous quarter, the first time Google’s sequential growth has climbed by double digits since the U.S. recession began in December 2007.
“Given that the global economy is still in the early days of recovery, this was an extraordinary end to the year,” said Eric Schmidt, Google’s chief executive.
The quickening growth pace indicates Google is regaining the pre-recession stride that enabled the company to consistently increase its quarterly revenue by at least 30 percent. Google is so large now that it will be difficult to get back to that level, but analysts still think revenue could rise by nearly 20 percent this year — up from 9 percent for all of 2009.
The brightening outlook has encouraged Google to loosen its pursestrings to hire more employees, make more acquisitions and mine new business opportunities such as mobile phones. Investors aren’t thrilled with that commitment because Google won’t say how much it’s prepared to spend, raising worries that its profit margins might not expand as much as its revenue this year.
Google added 170 workers in the fourth quarter, bringing its payroll to 19,835 employees. If it can find enough qualified candidates, Google would like to hire about 2,000 workers this year, with an emphasis on engineering and ad sales, said Patrick Pichette, the company’s chief financial officer.
Schmidt also told investors in the conference call that the company will likely make at least one acquisition per month, “some big, more small.” The company’s biggest pending acquisition is a proposed deal to buy AdMob, a mobile advertising service, for $750 million.
Google’s recent decision to sell a mobile phone, called Nexus One, has been particularly vexing for investors because the costs to promote and support the device could be greater than the revenue it brings in, said Signal Hill Group analyst Todd Greenwald.
Schmidt didn’t say anything new about Google’s uncertain future in China during a conference call with analysts. He reiterated Google’s hope to find a way to maintain a presence in China while emphasizing the company intends to stop censoring search results in the country within “a reasonably short time.” That plan conflicts with China’s restrictions on content that the government deems subversive or pornographic.