Net income climbed 8.9 percent to $1.42 billion, or $4.49 a share, the company said yesterday. Excluding revenue passed on to partner sites, sales were $4.07 billion, compared with the average analyst estimate of $4.1 billion in a Bloomberg survey.
The slump in advertising spending led to Googles first sequential drop in quarterly sales since it went public in 2004. The company is now cutting research, marketing and side projects to cope with the economy, which shrank 6.3 percent last quarter.
“Were still basically in uncharted territory,” Chief Executive Officer Eric Schmidt said on a conference call. “The current economic environment, which everybody is all very, very familiar with, remains tough.”
Google, based in Mountain View, California, was little changed in extended trading after the earnings report was released. The shares, which closed at $388.74 yesterday on the Nasdaq Stock Market, have risen 26 percent this year.
The recession is changing the way consumers behave online, Patrick Pichette, chief financial officer, said in an interview.
Window Shopping
“In this economy, theyre just doing more window and comparison shopping,” he said. “Theyre also purchasing lower- priced goods. But theyre buying — maybe buying less, maybe different things.”
That means Google still has a role, Pichette said. People are using the search engine to find coupons and bargains online, he said. Queries on health and autos also fared well during the quarter.
Excluding costs such as stock-based compensation, earnings were $5.16 a share last quarter, compared with the $4.95 estimated by analysts. Net income was $1.31 billion, or $4.12 a share, a year earlier. While sales rose 6.2 percent, Googles total expenses were little changed from last year, at $3.63 billion.
“Technology and the Internet continue to be a space where advertisers are continuing to invest,” Darren Chervitz, a fund manager at Jacobs Asset Management in New York, said in a Bloomberg Television interview. “The fact that theyre growing at all is pretty impressive.”
Management Change
U.S. online advertising spending growth will slow to 4.5 percent this year, according to New York-based research firm EMarketer Inc. Thats down from 10 percent in 2008.
Still, the ad market might have stabilized in March, Marianne Wolk, an analyst with Susquehanna International Group LLLP, said in a report. The number of online searches surged 9 percent in March over February, according to ComScore Inc. of Reston, Virginia.
Google handled 64 percent of U.S. queries in March, according to ComScore. Yahoo! Inc. was No. 2 with 21 percent, while Microsoft Corp. had 8.3 percent.
Google is seeking to expand beyond search-based text ads, which provide its biggest chunk of revenue. The company acquired DoubleClick last year to extend its reach into display advertising, including banner ads.
YouTube Ads
Google said last month that it was testing new kinds of ads on its YouTube video service and partner sites. The ads target users based on the types of sites they visit and their interests, rather than just what theyre searching for.
YouTube said yesterday it reached accords with Hollywood studios including Sony Corp., CBS Corp. and Metro-Goldwyn-Mayer Inc. to put movies and television shows on the Internet.