Google reports revenue increase, plans for stock split
By Hayley Tsukayama,
Google shares were up 2.4 percent in after hours trading following the company’s Thursday report that its revenue climbed 24 percent to $10 billion, beating analyst estimates. Net income for the quarter was $2.89 billion, up $1.8 billion from the same period last year.
The company also announced that it would authorize a 2-for-1 stock split, which the company said would “preserve the corporate structure that has allowed Google to remain focused on the long term.”
The move is a dividend that creates a new class of stock. All current Google stockholders will receive one new share of the new, non-voting stock, giving investors twice the number of shares they had before. The board will vote on the proposal soon, Google chief legal officer David Drummond said in an earnings call with investors.
In the call, Google CEO Larry Page said the shares “will be available best for corporate users, like equity-based employee compensation, that might otherwise dilute our governance structure.”
He added that the split does not indicate that Google is planning a large acquisition.
Page and fellow co-founder Sergey Brin said in a founders’ letter that they are aware that some people will not like the proposal. CNN Money reported that the plan could give Google’s founders and chairman Eric Schmidt more power than shareholders, because it keeps the voting power in the hands of these three investors. According to the report, the founders and Schmidt hold 66 percent of the voting power over the company’s shares.
Google investors had been vocal about demanding a dividend, particularly after tech rival Apple announced that it would be issuing a cash dividend to its investors last month. And investors have expressed concern about Google’s many projects, including the “moonshot” projects from its Google X labs.
Page focused the bulk of his comments on Google’s product strategy to make technology take care of the bulk of busy work from users. Page said that several Google products, such as Android, Chrome and YouTube, have passed the “toothbrush” metric and are used at least once or twice a day.
Page also touted a few products that he believes exemplify the company’s aims to remake its products to be more useful, such as Android for Chrome, the newly remade Google Play, and the integration of Google+ into many of the company’s products. The network itself, Page said, has over 170 million users.
Google also reported that, in advertising, its cost-per-click was down 12 percent from the same period last year, while paid clicks were up nearly 40 percent. Chief Financial Officer Patrick Pichette said that the drop in cost-per-click should not be read as an indication that advertisers have less demand for Google products.