Despite the spending dearth of the recession and reports that search advertising spending is down, Google Jan. 22 reported net income of $382 million on earnings per share of $1.21 for the fourth quarter of 2008.
While this profit figure was down 68 percent from the $1.29 billion on EPS of $4.06 from the third quarter, Google also beat expectations, reporting fourth-quarter EPS of $5.10 compared with $4.92 in the third quarter of 2008. Analysts polled by Thompson Reuters were expecting Google to rake in $4.95 per share.
The search giant, which trimmed several Web services programs Jan. 14 to save money and resources, reported sales of $5.70 billion for the quarter, an increase of 18 percent from the fourth quarter of 2007 and a modest 3 percent increase from the third quarter of 2008.
Google CEO Eric Schmidt acknowledged the current recession in a conference call Jan. 22 to announce fourth-quarter earnings by noting that Google "is prepared to get through this, no problem." He also alluded to the Web services cuts as a way the company is tightening its belt for the recession and promised Google would continue to review products with "low impact."
Traffic acquisition costs, or the money Google pays to partners such as AOL to run its ads alongside search results, totaled $1.48 billion, or 27 percent of Google's ad sales. This figure was down from $1.5 billion for the third quarter.
Google's fourth-quarter paid click share, which includes clicks on ads served on Google sites and the sites of its AdSense partners, increased approximately 18 percent from the fourth quarter of 2007 and 10 percent over the third quarter of 2008.
To retain the 85 percent of employees whose stock options are "under water," or whose exercise price is significantly higher than Google's current stock price of $306.50, Schmidt also said Google will offer employees a voluntary, one-for-one stock option exchange.
This program is expected to begin on Jan. 29 and end on March 3. Google expects stock-based compensation charges for grants to employees prior to Jan. 1, 2009 to total $1.04 billion for 2009. The company also said it expects a modification charge of $460 million over the vesting periods of the new options.
Google's net income was dinged due to $1.09 billion asset impairment charges related to Google's investments in AOL and Clearwire, but other than that it's hard to find dark clouds in Google's report, especially compared with results from rivals.
Microsoft, Google's erstwhile challenger in search and Web services, Jan. 22 said it was laying off 5,000 people and that Microsoft's operating income had declined 8 percent, net income had fallen by 11 percent and earnings per share had dipped 6 percent year over year.
"The economy has clearly deteriorated more than we expected," Microsoft Chief Financial Officer Chris Liddell told financial analysts during the conference call.
Meanwhile, Nokia, which Google is trying to challenge in the mobile operating system space, reported a drop in fourth-quarter profit, and warned that market volumes would shrink 10 percent in 2009 due to the recession.
Still, Google soldiers on despite having cut projects such as Google Print Ads, Google Video, Google Catalog Search, Lively and other efforts designed to attract more users.
While the company trimmed thousands of contractors and 100 recruiters from its ranks, Google still employs 20,222 full-time employees and has $15.85 billion in cash.