Google Beats the Street in Q4 with Rising Profit, Sales

Google's fourth-quarter earnings and sales trumped analysts' expectations Jan. 21, with the search engine reporting a fourth-quarter 2009 profit of $1.97 billion, or $6.13 a share.

The profit hike for the fourth quarter of 2009 was roughly five times that of the same quarter one year ago, when Google tallied $382 million on earnings of $1.21. Excluding stock-based compensation, Google garnered an EPS of $6.79 on sales of $4.95 billion. Wall Street analysts had expected Google to report sales of $4.9 billion on EPS of $6.50.

Google CEO Eric Schmidt championed Google's business model at a time when online advertising dollars are scarce owing to the recession.

"We're optimistic about the future as a result," Schmidt said on an earnings conference call. "The digital economy continues to grow very rapidly. Specifically, we're moving literally eyeballs and advertising online."

Schmidt also talked about Google's future investments, noting that people were the primary investment, particularly top-notch computer engineers, programmers and researchers.

Google will continue to emphasize innovation in search in 2010, just a month after launching its first foray into indexing real-time content from Twitter, Facebook, MySpace, news publications and blogs. Schmidt called this launch "very successful."

Google also added 550 search quality enhancements, including a recent push to emphasize synonyms in search results to distinguish between words and acronyms that have many meanings.

Google's mobile search traffic increased by five times in the past two years, buoyed by strong sales of devices based on Google's Android mobile operating system.

Specifically, Schmidt pointed to the Motorola Droid Google launched with the help of a $100 million ad campaign from wireless carrier Verizon Wireless in November 2009.

Google also has high hopes for the Nexus One smartphone, which Google launched Jan. 5 through its new online Webstore. "The Droid and Nexus One show the power of the Android approach," Schmidt said.

However, the Nexus One has been plagued by T-Mobile 3G service issues and concerns about the high cost of the unsubsidized phone and steep early termination charges.  

The smartphone, based on Android 2.1, sold only 20,000 units in its first week, according to Flurry. Moreover, Google's recent brouhaha with China, which it is threatening to exit after a hack attack on its Gmail accounts, has caused greater uncertainty over Android's viability in that country.

Looking forward in 2010, Schmidt pointed to commerce and social initiatives, and hinted that Google could make acquisitions in any number of areas after ramping up its acquisition strategy. Google bid to buy On2 Technologies, Recaptcha, AdMob, Gizmo5, Teracent and AppJet in 2009.

Schmidt said to expect Google to continue acquiring a company per month, mostly on the small side, in 2010. The company reportedly almost acquired Yelp and is said to be eyeing real-estate-related properties such as Trulia as it seeks to expand its location and commerce-related search.

In other financial facts, Google said its traffic acquisition costs—the portion of revenues that Google shares with its ad partners—accounted for 27 percent of Google's revenues in the fourth quarter, totaling $1.72 billion.

Paid clicks for ads served on Google sites and those of its AdSense partners increased 13 percent from fourth-quarter 2008 and 9 percent over third-quarter 2009.

Google has $24.5 billion in cash. The company employed 19,835 full-time employees through Dec. 31, 2009, up from 19,665 full-time employees through Sept. 30, 2009.