SAN FRANCISCO: Google Inc’s second-quarter earnings missed analysts’ target as higher expenses and the fallout from the European debt crisis dragged down the Internet search leader.
The letdown announced yesterday stemmed from Google’s expanding payroll and a run-up in the US dollar that has been driven by fears that the euro will crumble if governments in Greece, Spain, Portugal and Italy default on their perilously high debts.
The worries hurt Google because about one-third of the company’s revenue comes from Europe, and customer payments made with the euro translated into fewer dollars than a year ago.
Meanwhile, Google is spending more to expand. The company added nearly 1,200 employees in the second quarter to end June with more than 21,800 workers.
Despite the currency squeeze and rising expenses, Google’s net income and revenue still rose at a fast clip. But the earnings growth wasn’t quite as robust as analysts had hoped, a factor that seemed to amplify investor concerns that had already been weighing on Google’s stock price.
The report wasn’t entirely bad news. In a positive sign for the overall economy, marketers were willing to pay more for the online ads that generate virtually all of Google’s income, and people are clicking on the commercial messages more frequently.
Those trends provide another indication that more companies and shoppers are feeling a little better as they recover from the worst economic downturn in more than 70 years.
Google, which is based in Mountain View, earned US$1.84bil (RM6.3bil), or US$5.71 (RM19.40) per share, in the April-June period, up 24% from US$1.48bil (RM5bil), or US$4.66 (RM15.84) per share, a year ago.
If not for expenses covering employee stock compensation, Google said it would have made US$6.45 (RM22) per share. That figure was below the average estimate of US$6.52 (RM22.17) per share among analysts polled by Thomson Reuters.
Revenue climbed 24% to US$6.82bil (RM23.2bil), from US$5.52bil (RM18.8bil) a year earlier. After subtracting commissions paid to its ad partners, Google’s revenue stood at US$5.09bil (RM17.3bil) — about US$10mil (RM34mil) above analyst projections.
After clamping down on its costs most of last year, Google has been spending more freely so far this year because management believes the US economy is steadily rebounding, with electronic commerce and the rest of the technology sector leading the charge.
Google has brought in nearly 2,000 employees during the first half of this year, through both recruitment and a flurry of mostly small acquisitions.
The company’s spending on datacentres and other projects known as capital expenditures totalled US$476mil (RM1.62bil), more than tripling from the same time last year.
It plans to continue investing in more employees and technology as it tries to position itself to take advantage of an improving economy, said Patrick Pichette, Google’s chief financial officer.
“We are really pleased with the way we are performing in this economy,” Pichette said during a conference call yesterday with analysts. “That’s why we feel confident about the future.”
To help pay for its ambitions, Google said it will take on significant debt for the first time in its six years as a public company, even though it has US$30bil (RM102bil) in cash. The company’s board of directors approved a plan to borrow up to US$3bil (RM10.2bil).
The number of revenue-generating clicks on Google’s ads in the second quarter increased 15% from the same time last year. The gain is in the same range as the increases in the past year.
The average price per ad click in the second quarter edged up 4% from last year, but it’s slower than the growth seen during the previous two quarters. — AP
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