Google Books Highest Quarterly Profit Ever

By Michael Liedtke
Associated Press
Friday, October 16, 2009

SAN FRANCISCO, Oct. 15 -- Google shifted into a higher gear in the third quarter and began to leave the recession behind as the 11-year-old Internet search leader recorded its highest profit ever.

The results released Thursday are the strongest indication yet that the Internet advertising market is bouncing back from its worst funk since the dot-com bust at the start of the decade.

Google is considered a good barometer for the state of Internet commerce because its search engine serves as the hub of the Web's largest advertising network.

The company said it earned $1.64 billion ($5.13 per share) in the third quarter. That represented a 27 percent increase from the $1.29 billion ($4.06) it earned a year ago.

Excluding expenses for employee stock compensation, Google said it would have made $5.89 per share -- above the average estimate of $5.42 per share among analysts polled by Thomson Reuters.

Revenue for the three months ending in September climbed 7 percent, to $5.94 billion. That is Google's fastest growth rate so far this year.

After subtracting commissions paid to Google's advertising partners, the company's revenue totaled $4.38 billion -- about $140 million above analyst estimates.

"The worst of the recession is clearly behind us, and because of what we have seen, we now have the confidence to be optimistic about our future," Eric Schmidt, Google's chief executive, told analysts in a conference call.

Schmidt's optimism echoed his public remarks leading up to the earnings release. That sentiment has helped propel Google to a succession of new 52-week highs this week, a rally that continued after the company put out its third-quarter number.

Google's shares rose $16.44, or 3.1 percent, to $546.35 in extended trading. In regular trading earlier, shares fell $5.41, or 1 percent, to close at $529.91.

In a telling sign that things are picking up again, Google's third-quarter revenue rose 8 percent from the second quarter.

Even as more advertising flowed into its Web site, Google kept a tight grip on its expenses -- a strategy that enabled the company to boost its profit during the first half of the year even as its rate of revenue growth slowed.

The company cut its workforce for the second consecutive quarter, ending the September period with 19,665 employees. That's 121 fewer people than at the end of June.

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