Google Eyes Acquisitions amid 27% Profit Hike in Q3

Kicking sand in the face of the recession, on Oct. 15 Google reported third-quarter profit of $1.64 billion on earnings per share of $5.13, a 27 percent boost from its profit of $1.29 billion on EPS of $4.06 in the year-ago period.

Google posted third-quarter revenues of $5.94 billion, 7 percent greater than third-quarter 2008 revenues. Google's profit per share was $5.89, beating the $5.42 expected by analysts polled by Thomson. Google said net revenue for the period hit $4.38 billion.

Shares of Google were trading at $544.47 per share, up 2.8 percent in after-hours trading on the news.

The positive earnings were foreshadowed in comments from Google CEO Eric Schmidt,  who had been saying the economy is recovering from the recession that caused online ad dollars, so precious to Google, Yahoo and others in the Internet sector, to dry up.

"We believe the worst of the recession is behind us, and we're seeing lots of signs of that in all of the industries that we pay attention to," the Wall Street Journal quoted Schmidt as saying Oct. 15, while Rob Hof of BusinessWeek quoted Schmidt as saying on Google's earnings call, "We now have the business confidence to invest in the next phase of innovation."

That next phase will include a ramp up in hiring, innovation in search and ad quality, for desktops and mobile devices, the Android mobile operating system, YouTube, and Google Apps. Schmidt also stressed that Google would make acquisitions, as he boldly proclaimed: "We're open for business in making strategic acquisitions, both large and small."

Schmidt said Google hopes to get a version of its open-source Chrome Operating System out to developers to test later in 2009, claiming after seeing internal demos that it is superior to incumbent operating systems, including Microsoft Windows and other Linux distributions, in "speed and efficiency." Chrome OS is expected to appear on netbooks in the first half of 2010.

Google had a stout quarter for wireless deals, new search services and other areas. Just last week on Oct. 6, the company inked a deal that would allow Verizon Wireless to put Android on mobile devices including smartphones, PDAs and netbooks.

On Oct. 1, Google added new Search Options to let users refine search results, adding search by hour and date range functions, and the ability to sift through books, blogs and news.

In September, the search engine introduced Google Fast Flip to offer users a different way to browse magazines online, and unveiled its Sidewiki annotation service. Google began indexing Hot Trends in search results, too.

Google moved to boost its online display ad business by launching the DoubleClick Ad Exchange, targeting Yahoo's world-leading 20 percent display ad share. The company also accelerated its YouTube monetization efforts at a time when the video-sharing site is now showing 1 billion videos per day.

In other third-quarter metrics, Google said TAC (traffic acquisition costs)—the money Google paid to its partners to carry its online advertising—totaled $1.56 billion, or 27 percent of the company's advertising revenues, compared with TAC of $1.50 billion in the third quarter of 2008.

Paid clicks, or clicks on ads served on Google sites and the sites of its AdSense partners, increased 14 percent from third-quarter 2008 and 4 percent over last quarter. Average cost per click, or clicks related to ads served on Google and those of its AdSense partners, decreased 6 percent from third-quarter 2008, but increased 5 percent from last quarter.

Through Sept. 30, Google had $22 billion in cash and 19,665 full-time employees.