Saturday July 21, 2012
Google Internet business defies economic worries, revenue up 21%
SAN FRANCISCO: Google Inc’s core Internet business increased revenue by 21% in the second quarter, easing Wall Street worries that a slumping global economy would take a toll on the company’s online advertising.
Shares of the world’s No.1 search engine were up about 3% in after-hours trade.
Google, which reported its first set of quarterly results since its May acquisition of Motorola Mobility for US$12.5bil, offered few details about its plans to expand into the hardware business, focusing instead on what it described as healthy trends in its traditional online advertising business.
“The stock is working after hours because core search seems to be working really well,” said Think-Equity analyst Ronald Josey.
“I don’t think it was a knock-the-cover-off-the-ball quarter, but a quarter that showed that despite the fears around macro and FX, the company continues to execute really well,” said Josey.
Google’s advertising rates continued to be pressured by adverse macroe-conomic and currency conditions and by consumers’ increasing use of smartphones to access mobile versions of the Web. But investors took comfort in the 42% surge in overall clicks on Google’s search ads during the second quarter.
“Paid-click volume is really strong; it’s a good thing. The volumes are accelerating and usage of Google has not stopped, it has just continued,” said Susquehanna Financial analyst Herman Leung.
Google said revenue for its existing Internet business totalled US$10.96bil in the quarter, up from US$9bil a year earlier.
Google finance chief Patrick Pichette said the company was still in the process of evaluating every business and division of Motorola.
“I need a bit of patience for us to complete our homework,” Pichette said, when asked about Google’s views on Motorola’s television set-top box business.
Investors have a wide range of questions about Google’s expansion into the hardware business, where margins are low and competition with the likes of Apple Inc and Samsung Electronics is fierce.
“We, like everyone else, were expecting to get a little more around what they were expecting to do with it, rather than just noting that it’s only a couple of months in,” said RBC Capital Markets analyst Andre Sequin, referring to Google’s plans for Motorola two months after the deal officially closed. – Reuters