Google Profits Jump - Again

Oct 18, 08:09 PM

Current Headlines: By Elise Ackerman, San Jose Mercury News, Calif.

Oct. 18--Google said its net income increased 46 percent as the Internet giant continued to grow strongly but more slowly than in the past.

Investors who bid up Google's stock more than $100 during the past month were not disappointed.

The company reported quarterly revenues of $4.23 billion, up 57 percent from the same period one year ago. Net income was $1.07 billion or $3.38 per share. Excluding stock-based compensation, Google said it earned $3.91.

Analysts surveyed by Thomson Financial had been expecting that number to be $3.78. Analysts have generally had difficulty forecasting Google's earnings because the Mountain View company does not provide the same detailed guidance as other companies do.

Google's stock closed at $639.62 in regular trading today, up about 1 percent. Since the beginning of the year, Google has risen 37 percent.

The Internet behemoth continued to hire at a breakneck pace, adding 2,130 new employees, more than any other quarter since the company went public. Google now employs a total of 15,916 people.

Overall, however, Google's operating expenses declined slightly as a percent of revenues compared to the quarter ended July 31, 2007. Operating expenses, which included $659 in payroll related expenses, were $1.25 billion, or 30 percent of revenues, compared to $1.21 billion, or 31 percent of revenues, in the second quarter of 2007.

Capital expenditures declined in total dollars to $553 million compared to $575 for the quartered ended June 30, 2007.

Analysts had been increasingly concerned about Google's spending on both payroll and IT infrastructure. In the past, young rapidly growing technology companies have sometimes struggled to keep costs under control.

In a conference call with analysts, Chief Executive Eric Schmidt said the surprising large number was due to college graduates joining Google after accepting job offers months earlier. He added that 300 of the new employees came from Google's recent acquisition of Postini, which makes e-mail software.

"The numbers you are seeing are an overhang," Schmidt said. "The important thing is we did in fact correct."

Contact Elise Ackerman at eackerman@mercurynews.com or (408) 271-3774.

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