Everything clicks as Larry Page wows Wall St with results from Google

Published on Thursday 14 July 2011 22:30

Google shares surged yesterday after co-founder Larry Page's first results since taking over as chief executive took Wall Street by storm.

The internet search giant trounced expectations after net profit for the three months to 30 June jumped 36 per cent on a year earlier to $2.5 billion (1.5bn) and revenues lifted 32 per cent to a record $9bn.

Shares saw double-digit gains yesterday following the results late on Thursday night, taking the stock price to where it stood before Page replaced Eric Schmidt as chief executive in early April.

Since then sentiment has been hit by fears that the company's earnings might suffer because of Google's commitment to hire 6,200 workers this year, the most in the internet search company's 13-year history.

Page pledged to be a "careful steward of shareholders' money" but also told analysts that the firm would still invest heavily in expanding into other markets in pursuit of bigger profits.

He said: "I see more opportunities for Google today than ever before because, believe it or not, we are still in the very early stages of what we want to do."

Google's newest venture is a Facebook-like social network called Plus, which launched two weeks ago and has received positive reviews.

In order to fulfil its expansion, the group increased its headcount by 9 per cent or 2,542 employees in the quarter, taking the overall total to nearly 28,800.

The average price paid per advertising click on Google's websites rose by 12 per cent from last year as advertisers were willing to pay higher prices to promote their products. The number of times web surfers clicked on ads rose by 18 per cent year-on-year.

Page told analysts the company had signed up more than ten million people for Plus - the company's biggest foray into the hot social networking arena and the vanguard of its battle with Facebook and Twitter for websurfers' time and attention.

Google is fighting technology heavyweights that also include Apple and Microsoft, as well as upstarts such as Groupon, as it seeks to protect its lucrative search business at a time when mobile gadgets and social media are redefining the way consumers use the web.

Stifel Nicolaus analyst Jordan Rohan said: "Google should be viewed as a growth company again this quarter.

"The combination of mobile search, Android, ad exchange, YouTube, and the core search businesses, they're all doing well. Google is no longer a one-trick pony."

Analysts said the big rise in sales more than outweighed higher costs, but Google might find it increasingly difficult to shore up margins while it continues to hire, acquire and invest.

Colin Gillis, an analyst at BGC Partners, added: "Revenue growth overrides the hiring and the expense issues.

"Nice quarter from the guys, but you still have a situation of declining margins."