Google Beats Forecasts After Impressive Profit Hike

Google has beaten analyst forecasts for its fourth-quarter earnings, and the search engine giant indicated there would be no let up with its acquisition strategy.

For the fourth-quarter Google reported a profit of $1.97 billion (£1.2 billion), or $6.13 (£3.78) 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 (£236 million) on earnings of $1.21 (74 pence).

Excluding stock-based compensation, Google garnered an EPS of $6.79 (£4.19) on sales of $4.95 billion (£3.06 billion). Wall Street analysts had expected Google to report sales of $4.9 billion (£3 billion) on EPS of $6.50 ($4.01).

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 emphasise 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 emphasise 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 (£62 million) ad campaign from wireless carrier Verizon Wireless in November 2009.

Google also has high hopes for the Nexus One smartphone, which Google launched 5 January 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 unsubsidised 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.