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January 31, 2007

Google beats expectations, but…

Posted by David Hunter at 8:37 PM ET.

Google exceeds expectations in Q4:

Google beat Wall Street’s expectations for its fourth quarter, ended Dec. 31, 2006, as the company continues on a tear, selling search engine advertising much faster than its biggest rivals and than the industry average.

Google generated revenue of $3.21 billion, an increase of 67 percent compared to the fourth quarter of 2005, the company said Wednesday. Subtracting the commissions it pays to its advertising partners, revenue came in at $2.23 billion, topping the consensus expectation of $2.195 billion from analysts polled by Thomson Financial.

Net income was $1.03 billion, or $3.29 per share, compared with $372.2 million, or $1.22 per share, in 2005′s fourth quarter. On a pro forma basis, which excludes certain items, net income was $997 million, or $3.18 per share, topping analysts’ expectation of $2.92 per share.

With profit almost tripling and revenue increasing at blockbuster rates, Google executives were unsurprisingly ecstatic in a conference call about the quarter’s results and indicated that the company has many green fields to explore and keep growing.

However, the good news wasn’t good enough for the tough bunch on Wall Street:

The news pushed shares in the Web search leader down more than 3 percent in after-hours trading.

“The stock is down because they didn’t blow out the numbers. Expectations have come up recently,” said Martin Pyykkonen, an analyst at Global Crown Capital. “As expected they gained share relative to Yahoo in paid search but not by a wide margin.”

Note also that per the press release, 37% of Google ad revenue came from partner sites. While this has been dropping slightly over recent quarters it’s still a respectable chunk of change, but one that Microsoft so far refuses to sully its hands with.

Filed under Coopetition, Google, MSN, Microsoft, Yahoo, adCenter

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